Convenience Store Decisions June 2017 by WTWH Media LLC

Volume 28 19 •• Number Number 6 • JUNE 2017 2008

Business Solutions for Retail Decision Makers

® A

HARBOR COMMUNICATIONS

P U B L I C AT I O N

Pressed

by Local Laws

C-stores are finding the burden of tobacco control regulations is often heaviest within the communities where they operate.

Cigarettes Remain On Top ..........30 Cigars Reflect Healthy Profits .....52 Pizza: Baking Bold Offerings ........64

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Volume 28 19 •• Number Number 6 • JUNE 2017 2008

Business Solutions for Retail Decision Makers

® ® A

H A R B O R C O M M U N I C AT I O N S

P U B L I C AT I O N

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364MM

383MM

403 0 MM 03

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337MM

309MM

283MM

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Q2 ’15

Q3 ’15

Q4 ’15

Q1 ’16

Q2 ’16

Q3 ’16

Q4 ’16

Q1 ’17

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DEPARTMENTS ®

JUNE 2017

• Volume 28

•

Issue 6

8 Editor’s Memo: Leadership and Employee

Relationships

10 Front End: CSD's Quick Bites 12 Front End: Industry News 14 Convenience Store Solutions: Crafting a

Public Relations Plan

16 Column: Mary Szarmach- Coming Soon to

Your Neighborhood

18 Column: Anne Flint- Realizing Potential of

E-Cigs

20 Column: Don Burke- Focus on Category

Opportunities

34 Category Manager's Notebook: E-Cigs:

Reacting to Market Influences

40 Category Manager's Notebook: Optimistic

About Vapor

44 Tobacco Column: Smokeless Makes a

Comeback

InsidethisIssue

48 Category Manager's Notebook: Working

24 Cover Story: Pressed by Local Laws

52 Category Manager's Notebook: Cigars

C-stores are finding the burden of tobacco control regulations is often heaviest within the communities where they operate.

56 Category Manager's Notebook: Tobacco

With Roll Your Own

Reflect Healthy Profits

Accessories Stay Afloat

57 Tobacco Column: New York Retailers

30 Cigarettes Remain On Top

Under Siege

Although smoking rates have been on the decline, cigarettes remain a leading performer for convenience stores.

58 Foodservice: Marketing Meaty Meals

64 Pizza: Baking Bold, Authentic Offerings

68 Technology: Moving Forward With

Consumers’ quest for healthier snack options is changing the face of traditional c-store offerings.

Payment Technology

70 Technology Column: Accountability Is Key

to Loss Prevention

72 Operations: Loyalty Bits

74 Operations: Designing for Success 68 New Stuff! 80 Quick Shop 81 Ad Index 82 Industry Perspectives: Bottlenecks and

Hidden Treasures

4 Convenience Store Decisions l June 2017

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SAME GREAT TASTE. SAME GREAT MARGINS. NOW IN A 4-PACK.

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Convenience Store Decisions

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 .

EDITORIAL

CONTRIBUTING EDITORS

Editor-in-Chief,Vice President John Lofstock jlofstock@csdecisions.com

Anne Baye Ericksen Jeff Steele Lisa White

Senior Editor David Bennett dbennett@csdecisions.com

COLUMNISTS

Senior Editor/News & Online Erin Rigik Del Conte edelconte@csdecisions.com Associate Editor Howard Riell hriell@csdecisions.com Associate Editor Marilyn Odesser-Torpey mot@csdecisions.com

ART Creative Director Erin Canetta ecanetta@csdecisions.com

Don Burke Jim Callahan Jim Calvin Ed Collupy Fran Duskiewicz Anne Flint Andrea Myers Mary Szarmach

PRODUCTION

NATIONAL ADVISORY GROUP BOARD Peter Tamburro, Board Chairman Clifford Fuel Co. • Utica, N.Y.

Jim Callahan, Director of Marketing (Retired) Geo. H. Green Oil Inc. • Fairburn, Ga.

Mary Banmiller, Director of Retail Operations Warrenton Oil Inc. • Truesdale, Mo.

Brad Call, Executive Vice President Maverik Inc. • Salt Lake City

Greg Ehrlich, Chief Operating Officer Beck Suppliers Inc. • Freemont, Ohio

Greg Lorance, Dispensed Category Manager Cumberland Farms • Framingham, Mass.

Joe Hamza, Chief Operating Officer Nouria Energy Corp • Worcester, Mass.

Kyle McKeen, President and CEO Alon Brands • Dallas

Brent Mouton, President and CEO Hit-n-Run Food Stores • Lafayette, La.

Billy Milam, President RaceTrac Petroleum Inc. • Atlanta

Robert O’Connor, President and CEO O’Connor Petroleum Co. • Hales Corners, Wis.

John Kelly, Chief Operating Officer and Vice President, Operations Mountain Empire Oil Co. • Greenville, Tenn.

Vernon Young, President and CEO Young Oil Co. • Piedmont, Ala.

Scott Zaremba, President and CEO Zarco 66 • Lawrence, Kan.

Press’s highest recognition of

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 2017, Harbor Communications, LLC 6 Convenience Store Decisions

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June 2017

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

Webmaster Dave Miyares dmiyares@csdecisions.com

Robert Buhler, President and CEO Open Pantry Food Marts • Pleasant Prairie, Wis.

editorial excellence.

President, Harbor Communications Dan Ramella dramella@csdecisions.com (440) 250-1583

Production Manager Barbra Martin bmartin@csdecisions.com

EDITORIAL ADVISORY BOARD

Convenience Store Decisions is a three-time winner of the Neal Award, the American Business

ADVERTISING

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, Assistant to the President The Kent Cos. Sharif Jamal, Corporate Training Manager Chestnut Petroleum Distributors Lindsay Lyden, Vice President, Development Truenorth Energy Dana Moloney, Food Service Director Warrenton Oil Co. Jeremie Myhren, Vice President, IT Road Ranger Bart Stransky, Executive Director, Merchandising RaceTrac Petroleum Inc.

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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'SMEMO

Leadership and Employee Relationships

JOHN LOFSTOCK Editor-in-Chief (201) 837-2177 jlofstock@ csdecisions.com Follow me on Twitter @CSDEditor

HE CONVENIENCE STORE INDUSTRY will always be a people business. For many years that meant putting the customer first, rightfully so it seemed, since they were the ones spending money. But gradually over the past decade the top quartile convenience store chains realized the value they had in their people and that began a fundamental shift to a strict employee-first focus. This transition in priorities has been extremely effective and it hasn't really been talked about enough. Simply put, when your employees feel valued, they'll create a better experience for your customers, and, in turn, drive business up along with your company's reputation. In the competitive convenience store industry, having great employees has become your greatest competitive advantage. But it's hard work. Human resources consultant Mel Kleiman tells me all the time, "The reason companies don't have great employees is because they are not willing to put in the time and effort to get them and then keep them." In their bestselling book "Emotional Intelligence 2.0," Travis Bradberry and Jean Greaves focus in on relationship management. They conclude that as leaders, solid relationships must be sought and cherished. If you want to lead people and get them to understand your mission, you must have a connection with them-a real connection, not just a weekly memo and a quarterly store tour. "The difference between an interaction and a relationship is a matter of frequency," the authors said.“It's a product of the quality, depth and time you spend interacting with another person." Sounds like common sense, right? But how many c-store leaders are really following through on this strategy? Many studies have shown that employees value being recognized for great work over pay increases. If this is the case, you must do everything in your power to adopt this as a

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standard operating procedure for attracting and retaining talent. Little things like a letter of appreciation or a $20 gift card can be the boost to your staffing efforts that you have always been looking for, and it's been within your reach the whole time.

FOLLOW THE LEADERS Many of the great retailers that are celebrated for their customer service in and outside of the convenience store industry are quick to pin their success on their employees. I recently read an interview in Inc. magazine with Richard Branson, founder of the Virgin Group, widely recognized for its corporate culture. He was effusive in his praise of his employees. "It sort of should go without saying—and it's surprising that it still doesn't go without saying at some companies—that if a person who works for you is 100% proud of the job they're doing, if you give them the tools to do a good job, they're going to be proud to represent your brand. " Branson said. "If they feel they are being looked after and treated well, then they're going to smile, they're going to be happy and your customers will have a nice experience." However, if your employees are not given the right tools, are not looked after and not appreciated, "they are not going to do things with a smile and therefore the customer will be treated in a way where they won't want to come back," Branson said. "So, my philosophy has always been, if you can put staff first, your customer second and shareholders third, effectively, in the end, the shareholders do well, the customers do better and you can be proud of the effort.” This leadership strategy helped Branson create a global empire so it's hard to argue against his philosophy. But, again, the key to success is frequency. If you're only going to drop by once a quarter, don't bother. Your employees are likely already looking for another opportunity where they will feel valued.

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FRONTEND

CSD’S QUICK BITES Reaching for Do Customers Prefer Cash? Energy Drinks • 79% of consumers made monthly cash payments in 2016. • 38% of Millennials prefer cash. • 25% (roughly) of every other age group selected cash as their primary preference. • 50%+ of transactions under $25 are cash transactions. • 60%+ of purchases under $10 are cash transactions. TOP REASONS FOR USING CASH • Debt management • Privacy • Security

Source: Packaged Facts “U.S. Consumer Payments Outlook Through 2020.”

Over the past five years, the U.S. retail market for energy and sports drinks expanded at an annual rate of 7% culminating in $25 billion in sales in 2016. Source: Packaged Facts,“Energy & Sports Drinks: U.S. Market Trends & Opportunities.”

Putting Ahead As lifestyles change, more single adults are interested in improving health and their career rather than getting married or having children, according to a May 2017 report from Mintel. Single adults’ goals over the next five years:

56% improving physical health 49% finding a new job 42% buying a new car 29% buying a house or condo

26% getting married 14% having children 10 Convenience Store Decisions

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Alternative Proteins Evolve • Annual servings per capita of dairy alternatives have grown from 19 in 2013 to 21 in 2016 or 6.8 billion eatings.

CSD/NAG Idea of the Month:

Put a date on collectibles. • Consumption of If you’re selling collectibles, plant-based meat such as cups, toys or other items, alternatives has be sure to put the date on the item. declined from five Customers like to collect items over a long period of time and in 2013 to three per look back at how long they’ve capita or 972 million been collecting them and servings in 2016. recognize which item is from which month/year. • The average person Simply putting the consumed center-of-plate date on a collectible meat 73 times annually cup can make it (23.3 billion entrees). more fun for the customer.

• Annual servings per capita of milk was 117 or or a total of 37.9 billion last year.

Source: Mintel, May 2017

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INDUSTRYNEWS Cumberland Farms Adds to Healthy Partnerships

Mobil Stations to Open in Mexico ExxonMobil is entering the Mexican fuels market in 2017 with Mobil-branded stations and its new signature line of advanced Synergy gasoline and diesel fuels. The first station is set to open in central Mexico during the second half of 2017, and additional stations will open later in the year. ExxonMobil plans to invest about $300 million in fuels logistics, product inventories and marketing over the next 10 years to provide a reliable supply of quality products to the retail, wholesale, industrial and commercial sectors.

Cumberland Farms has teamed with the nonprofit Partnership for a Healthier America (PHA), becoming the largest convenience store chain in the U.S. to join PHA in its mission to promote healthy choices and fight childhood obesity. Cumberland Farms’ multi-part commitment is aimed at promoting healthier food options in the eight states— New England, New York and Florida—where Cumberland Farms operates. More than 70% of Cumberland Farms’ stores are located in ‘food deserts.’ Over the next three years, Cumberland Farms plans to: 7-Eleven has partnered with Lotte Card and Lotte • Emphasize the selection of healthier foods sold in its Data Communication, to launch its first smart convestores (through signage, new products, and revised store nience store equipped with a BioPay system at Lotte layouts); World Tower in Seoul, South Korea, according to The • Encourage its team members to incorporate healthier Korea Herald. BioPay is a payment method that allows foods into their diets (through exclusive everyday discounts consumers to make transactions by identifying themand nearly 40,000 employee coupons every month); selves with a part of their body linked to a credit card. • Support its communities by making healthier foods The 7-Eleven store at Lotte World Tower uses the HandPay more universally accessible (through competitive pricing, system, in which individuals are recognized by the veins continued SNAP participation, and more than 100,000 on the palm of their hand. The method was selected pounds of food donations every year); and over fingerprint and iris scanning because it was consid• Leverage its private label products to promote health- ered more convenient for customers. ier foods (through the PHA “Drink Up” Water Initiative and its “Healthier Food” ingredient and recipe guidelines).

7-Eleven Tests BioPay in Korea

Ricker’s Plants 11,017 Trees

Examining Customer Behavior at Pump

Ricker’s Replenish, a reduced emission program that reduces Ricker’s customers’ tailpipe emissions, has planted 11,017 t re e s t h ro u g h a partnership with the Arbor Day Fo u n d a t i o n a n d Keep Indianapolis Beautiful. Recently announced at the Statehouse Bicentennial Tree Dedication, Ricker’s shared this impactful milestone while dedicating 44 trees Ricker’s Replenish planted on the Statehouse lawn. The Replenish program funded and supported this project to celebrate Indiana’s Bicentennial and in hopes to leave a lasting legacy at the Statehouse.

Cuebiq, a provider of location data in the U.S., and GasBuddy recently conducted a joint study examining foot traffic of GasBuddy users to convenience stores and gas stations across the U.S. in the first quarter of 2017. The study analyzed more than 23 million consumer visits to stations and stores throughout the quarter, which enabled them to understand America’s refueling behaviors. Among key findings: Weekdays between 11 a.m. and 1 p.m. were highly-trafficked hours. Convenience stores are poised to lure business away from quick-service restaurants and grocery stores now that consumers can eat quality meals at the same place and time they choose to fill up their tanks. With filling a gas tank clocking in at an efficient 2-3 minutes, the 73% of those who spent more than five minutes at locations during the period demonstrated that consumers are likely willing to spend some time in store before or after visiting the pumps.

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Convenience Store Solutions

Crafting a Public Relations Plan Connecting with customers in ways that develop trust in your brand and goodwill within the community is a vital strategy to your business. By Jim Callahan

NE OF THE MOST important and often overlooked parts of being in business is the need to let customers and prospective customers know who you are but, more importantly, that you have something of value to offer. Whether it’s for low fuel prices, the quality of its homemade biscuits, the variety of fresh and exotic coffee flavors or the wide selection of craft beer, a c-store earns whatever reputation it has among local residents. That also goes for the things that retailers do in their respective communities, which can range from charity drives to social events. Discovering how to effectively convey messaging is important for a convenience retailer, whether it’s getting the word out about a candy promotion or soliciting donations for a food drive. Advertising is an important part of any marketing plan and it’s not too difficult to measure the return on investment, which has to be examined for its cumulative effect over a long period of time rather than in spurts of one or two months. Moreover, one must have patience and almost a blind confidence to determine what marketing efforts are needed and in determining which are working.

RELATING TO THE PUBLIC Advertising product offerings effectively is always good business. One of the well-practiced ways that’s effective is word of mouth—often through satisfied customers. Of course, this doesn’t alleviate the need to use newsprint, radio, television and—today—social media. There are virtually no major companies in today’s corporate world that don’t budget some for advertising. Just look at the number of big brand names that spend big-time on annual Super Bowl advertising. Consider this: 30-second Super Bowl ads went for $42,000 in 1967, $1.1 million in 1995, $3.1 million in 2010, and for an unbelievable $5 million-plus for a 30-second Super Bowl commercial this past year. The spectacular growth in demand and cost at this phenomenal business event—and football is big business—is proof that big promotions can generate excitement. However, most of us in the business aren’t ready to commit to such extravagant advertising budgets. Instead, targeting customers in more personal ways can be just as 14 Convenience Store Decisions

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effective. Moreover, connecting with customers in a way that develops trust in your brand and goodwill within the community is a vital strategy to your business. More and more, U.S. consumers rely on iPhones, iPads, Facebook and Snapchat. Developing public relations campaigns that integrate such communications tools will only help your efforts to create a solid public relations plan. However, advertising doesn’t need to be as expensive as you fear because there are many ways to get your message across without breaking the bank. Below are a mix of examples and suggestions to engage your customers that will bring attention to your stores: • Years ago, a local radio station in upstate New York was going to give a trip to Super Bowl 29 in Tempe, Ariz. The cost for each participating business was $4,800 and they were expecting 20 sponsors. With only six stores, I ran my own program, which included two tickets to the winner, airfare to Arizona, a nice hotel and meal money—all with a modest advertising budget of less than $2,000 (Give me a call and I’ll share the details). • Obtain advertising help from your local and national vendors for pushing new products. • Give inexpensive small American flags away to the first 1,000, 500 or 200 customers and provide details to local news media and social media sites. • Have a coloring or essay contest for an area school awarding prizes and perhaps $100 to the school—call local media for a photo opportunity or more realistically take your own high resolution pictures and send them to the local television stations. Even more effective is posting such announcements on your company’s website and on social media. • Sponsor an Easter egg hunt with a couple of employees in costume, or at Christmas time offer free photos of kids with Santa. In addition, consider taking Santa to a nursing home and submit pictures of Santa with patients, kids and your associates to local media outlets. There are numerous ways to connect with your customers and the community. Creativity and a good game plan are two key components. Jim Callahan has more than 40 years of professional experience as a convenience store and petroleum marketer. His Convenience Store Solutions blog appears regularly on CSDecisions.com. He can be reached at (678) 485-4773 or via e-mail at jfcallahan1160@gmail.com. CStoreDecisions ecisions .com

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COLUMN TOBACCO

Coming Soon to Your Neighborhood Pressing mandates involving tobacco products aren’t just playing at the federal and state levels anymore. Increasingly, local ordinances are having a direct impact on tobacco sales within the convenience store channel. By Mary Szarmach

HEN CONVENIENCE STORE DECISIONS asked me to write an article about state and local issues regarding tobacco products, I wasn’t quite sure there would be enough pages in the issue to cover everything that’s happening. For Smoker Friendly and our 103 stores located in the five states where we do business, an issue that poses a threat to our livelihood, comes up nearly every day. If you aren’t paying attention, state legislators, county commissioners or city council members are busy with social engineering, creating a nanny state right before our eyes. Ironically, it’s hard to comprehend while it’s happening, and certainly hard to deal with after the laws are passed. Often these ordinances are borne by local tobacco control projects, spearheaded by community-based organizations and local health departments. The prevalent policies and organized campaigns that increasingly threaten tobacco commerce in the U.S. include: flavor bans, coupon restrictions, local taxations, vapor bans, proximity of stores to schools and continued smoking bans in public places.

21 AND MORE State legislation has been very similar, with age 21 initiatives and increased taxes leading the charge. More states and local municipalities are influenced by Tobacco 21, a national campaign aimed at raising the minimum legal age (MLA) for tobacco and nicotine sales in the U.S. to 21. As part of the National Association of Tobacco Outlets (NATO), stakeholders fought tax increases successfully in Montana, Wyoming, Nebraska and Florida. We beat proposals to raise the minimum age requirement to 21 in Nebraska and Florida. We were lucky to win a ballot initiative for a tax increase in Colorado in November, but likely will have to fight it again. You might wonder how do we get these wins? Working with NATO, the International Premium Cigar & Pipe Retailers of America (IPCPR) and other organizations within the tobacco industry is a great start. Not all retailers roll up their sleeves to help fight these battles on a 16 Convenience Store Decisions

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grassroots level. The local battles are widespread and sometimes passionate—on both sides. Together, however, we have shown if you stand up to legislators and other challengers, you can win a majority of these battles. Many manufacturer and distributor partners will also lend a hand; I work closely with state people from Altria, R.J. Reynolds, Swedish Match, Swisher, and several Vape and premium cigar companies, and they can be of great help in these overzealous regulations. It takes some time and energy to put your story together and properly present it, but when you show them that you are a legitimate business person, a good employer and a law-abiding company, it becomes difficult for them to disagree. We are a highly-regulated and highly-taxed industry and experts at selling legal adult commodities. We should be proud that we do it right, and tell legislators just that. GETTING INVOLVED I urge everyone who sells tobacco products—no matter what trade class your store is in—to join NATO, and keep yourself informed. It’s the only organization that tracks local level tobacco issues and reports regularly to the industry. In many cases, these pop up overnight, and there’s virtually no time to spare getting your war chest in order. Local tobacco ordinances aren’t going away. In fact, the pace that local legislation is being introduced in town halls and city council chambers across the country is just increasing. And for every piece of tobacco legislation that is passed, there is a retailer, who sells tobacco, sure to be affected. Grassroots work does work and we should all take part, to help keep our industry safe from well-funded and wellspoken anti-tobacco proponents.

Mary Szarmach is vice president of trade marketing and government relations for Smoker Friendly International, based in Boulder, Colo., and the immediate past president of the National Association of Tobacco Outlets (NATO). CStoreDecisions ecisions .com

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COLUMN TOBACCO

Realizing E-Cigarette Potential Evolving with e-cigs requires commitment, but it can pay dividends for c-store retailers. By Anne Flint

N ORDER TO BE successful with the electronic cig- addition, we work in our local communities to ensure arettes segment, convenience store retailers have that regulations are fair and based on facts. We do this to think about the broader tobacco category and by being actively involved locally on all tobacco legisthe role that electronic cigarettes play in total store lation that affects our stores and we closely monitor any profitability. impact on the electronics category. The role of electronic cigarettes is evolving but we For example, some cities/towns have tried to ban look at it like this: More than one-third of adult smokers the retail sales of all electronic cigarettes with the only use an alternative form of nicotine. Electronic cigarettes one succeeding in our geography being Blackstone, provide higher margins and growth rates than most of Mass. (We showed our concern and they may be those alternatives. Due to the fact that our electronic revisiting the issue). The state of Connecticut chose cigarette manufacturers are flexible we can utilize their to require a separate permit per location for the sale brands and programs to build equity of electronic cigarettes, which and foot traffic for Cumberland Farms. was initially passed, that each We look at merchandising, pricing, “THE ELECTRONIC CATEGORY employee had to be licensed at positioning, manufacturing alignIS DYNAMIC AND WE KNOW a cost of $435 each annually—we ment and regulatory compliance fought this and the law was rewritTHE INVESTMENTS WE ARE ten for each location rather than from the lens of the adult tobacco consumer. We strive to create an MAKING TODAY WILL PROVIDE employee. environment where, no matter the Lastly, we stay abreast of LONG-TERM BENEFITS. THESE emerging trends to ensure that product choice an adult consumer makes, we have options, fair price INVESTMENTS GO BEYOND our stores possess the options points and the proper inventory. that the ever-evolving adult conTYPICAL SALES AND sumer is looking for. While electronic cigarettes IDENTIFY OPPORTUNITIES MARKETING STRATEGIES.” require commitment, the payAdditionally while brands are back can be significant. We have important, what is critical is how a seen this burgeoning product line manufacturer’s approach fits into Cumberland Farms’ strategic objectives. The challenges improve tobacco category margins, reduce reliance on with electronic cigarettes are the opportunities that we a small set of manufacturers, bring new customers to our stores and establish a foundation for future growth. can leverage to differentiate us from our competitors. In a time where differentiation is difficult to achieve Due to the rapid growth, staying in stock is particularly challenging. We partner with manufacturers that guar- with cigarettes, electronic cigarettes offer retailers a antee their products and then keep buffer inventory on unique opportunity. I would encourage retailers to suphand. Secondly, due to the newness of the category port those manufacturers and programs that incentivize many sales associates do not understand the products independence and alignment with the retailer’s goals. It’s hard to predict where the tobacco category as a or the difference between key brands. We train all associates so not only can they quickly educate a guest but whole ends up, but we have learned if you reduce your options the incredibly valuable tobacco consumer will highlight brands that benefit Cumberland Farms. The electronic category is dynamic and we know shop elsewhere. Electronic cigarettes are an important the investments we are making today will provide long- part of that option set and for us we look forward to term benefits. These investments go beyond typical even greater success with these products. sales and marketing strategies. Cumberland Farms works diligently to responsi- Anne Flint is the director of category management—tobacco at bly train our associates on key brand attributes so we Cumberland Farms. She also serves on the National Association of can assist our guests in making educated decisions. In Tobacco Outlets’ (NATO) board of directors. 18 Convenience Store Decisions

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COLUMN TOBACCO

Focus on Category Opportunities Despite constant pressure from regulatory bodies, there’s still enough potential in tobacco for c-stores to grow sales. By Don Burke

HE ONSLAUGHT OF TOBACCO regulations, increased age restriction legislation and higher taxation in many areas is creating quite a bit of concern among convenience retailers.This is understandable as tobacco products continue to deliver more than 35% of in-store sales in the convenience channel. In every analysis conducted by Management Science Associates (MSA), however, we have consistently found real positives to this category despite all the recent chaos. In fact, there are reasons convenience retailers should keep their focus on the opportunities this category represents rather than the turmoil. UNDERLYING MESSAGE While there has been much publicity on the U.S. Food and Drug Administration’s (FDA) deeming regulations it’s important to note that mandates on cigarettes occurred in 2009 with the Tobacco Control Act. This is important because cigarettes make up about 70% of the convenience store tobacco revenue, and manufacturers have already had signifi cant time to adjust their product line. In fact, MSA’s analysis shows that the recent FDA Deeming Regulations only have the potential to affect about 8% of the category volume. Additionally, in a study of price elasticity across several convenience product lines, the cigarettes had one of the lowest elasticity levels, meaning that consumers tend to continue to purchase without a big impact due to a price change. This has contributed to continued demand despite cigarette price increases and has contributed to revenue gains for retailers. While the cigarette sales have shown a consistent decline of 3-4% annually, and which have been more than offset by the price adjustments, there are other tobacco categories showing robust growth. Among these categories is the cigarillo category, which has grown at around 10% the past couple of years. The vapor category also showed stronger performance so far in 2017, with the e-cigarette items growing nearly 15%. Interestingly, the convenience channel has shown stronger growth in these categories than tobacco outlets, and has lost very little sales to the dollar store channel that has been trying to make inroads for several years. There has been much concern over the cigarette tax

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increases in certain areas, especially the $2 per pack hike in California that occurred this past April and prior to that, the $1-per-pack tax in Pennsylvania last August. While any tax increase yields a loss of business in that geographic area, analysis after analysis has shown that adjacent areas with lower pricing almost always pick up nearly a corresponding amount of business. In addition, some tobacco products benefit from significant increases in the cigarette set. For example, analysis of the Pennsylvania tax increase showed that moist tobacco experienced a 5% increase in sales following the cigarette hike. In addition, consumer purchase patterns changed, with two cigarette segments actually experiencing an increase in their share of the category—the value and the super-premium segments. The deep discount segment and the premium segment suffered the greater levels of sales decline. Another area worth the retailer’s attention is that tobacco purchases deliver some of the largest market basket rings in the convenience channel. PUT A RING ON IT According to MSA research, the average convenience market basket purchase is just under $7, but when cigarettes are added to the basket that ring jumps to nearly $13. The items most often purchased with cigarettes are beverages: carbonated soft drinks, energy drinks, beer and bottled water. Interestingly, one of the largest basket rings for retailers is from the vapor segment, where the basket ring tops $18. Category opportunity comes in many shapes. Stock up on product if you are near an area that just experienced an increase in tobacco taxes. If you are located in an area where a cigarette tax increase has occurred, monitor consumer response and make sure you maintain your stock in the value and super premium categories. Fur thermore, don’t forget to leverage the significant market basket potential of this important category. These few key steps will help to protect this critical tobacco revenue and may help to reduce your tobacco anxiety.

Don Burke is a senior vice president with Management Science Associates (MSA), a diversified information management company. CStoreDecisions ecisions .com

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COVER STORY

Pressed by Local Laws

C-stores are finding the burden of tobacco control regulations is often heaviest within the communities where they operate. By David Bennett, Senior Editor

N 2016, TOBACCO WAS the c-store industry’s biggest growth driver, generating $53 billion in sales, according to new Nielsen Homescan data. In fact, the tobacco category accounted for 38% of total c-store sales last year. As important as tobacco is to the convenience store channel, the movement to snuff out tobacco use in the U.S. is equally as pressing for advocates who champion restrictions on tobacco products—not just cigarettes, but various tobacco and vaping merchandise. The controls are also just as varied: minimum age requirements, excise taxes, advertising restrictions, flavor bans, zoning ordinances and other legislative rules. As new regulations are introduced, retailers, tobacco manufacturers and tobacco proponents often band together to meet the challenge. It’s an age-old conflict that garners public headlines, elevated lobbyists’ fees and, until the last few years, was mostly fought at the state and federal levels. Years ago, the thought of a local government body slow24 Convenience Store Decisions

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ing Big Tobacco business through a tobacco control proposal was akin to Bugs Bunny’s Marvin the Martian blowing up Earth with his ‘illudium Q-36 explosive space modulator.’ It was a small noise to be eradicated swiftly. The real artillery used for lobbing anti-smoking legislation resided with the states and federal agencies such as the U.S. Food and Drug Administration (FDA). However, in the last few years the battle lines have changed incalculably, shifting from state houses and federal committee rooms to town halls and city council chambers. And, make no mistake, Marvin the Martian appears to be winning. It might sound odd to say that giant convenience store retailers find themselves outgunned, but the speed and tenacity that local tobacco ordinances are being rolled out across the country is impressive. “If tobacco control wants to pursue more effective strategies, we’re seeing where that focus is going, and it’s going to where there’s less resistance and greater likelihood for

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5/23/17 2:32 PM

COVER STORY success,” said David Bishop, managing partner at Balvor stand the repercussions of the tobacco control legislation LLC, a sales and marketing practice based in Barrington, Ill. that’s being unleashed on Massachusetts retailers. For example, in some Massachusetts towns and cities, “The way tobacco control (groups) look at it, this is a long process and they’re going to have many battles in this war, you can sell tobacco to somebody who is 18 or older, some which they are going to take one at time. Where the industry communities state 19, and in others, you have to be 21. The is the weakest, unfortunately, is at the local level. And that’s burden is on the retailer to keep up with the patchwork of because we have a disproportionate amount of local, small rules while maintaining a profitable business in that community. Oftentimes, local officials cite health reasons for operators who aren’t as actively engaged.” More and more, tobacco control advocates are lobbying tobacco control measures. “From a legislative perspective, it’s very difficult to manlocal officials to enact tobacco regulations, pushing agendas such as flavor bans on other tobacco products (OTP) includ- age because there’s no consistency throughout the state,” ing cigars, e-cigarettes and vapor offerings. Also, the time said Bettencourt. “We have a town ( in Andover, Mass.) that between a recommendation and a full-blown tobacco ordi- we have two stores in, and will be going to a flavor ban and nance showing up on the books seems truncated. The result pricing restrictions on cigars June 1.” Bettencourt said she regularly attends public hearings can be a mashup of various tobacco laws that are becoming common in states such as California and Massachusetts. and engages both officials and residents. Sometimes the “California and Massachusetts are generally highissue seems a foregone conclusion lighted as the bookends to the most progressive-leaning even when the tobacco control states relative to tobacco-control practices,” Bishop said. argument seems irrational. “When you look at “How do you ban perfectly Massachusetts, you legal product?” Bettencourt c a n se e t h e abs oasked. “They have flavored lute fragmentation vodka (in local stores). of regulations and What’s the difference restrictions throughbetween that and a grape out that state, where cigar as along you’re some municipalities proselling it to an adult hibit the sale of certain whether the age is 18 flavored tobacco products or 21? and other municipalities in the Adding in its high same state permit it. If you are excise tax on cigaa retailer like a Cumberland Farms rettes, Massachusetts’ operating across the entire state, the inconsistent tobacco complexity of managing your business rules are making it is amplified many fold.” harder for VERC to consistently serve its customers. IN MASS Last June, Cumberland Farms, which operates more than PAPER CHASE 200 stores in Massachusetts—sent a letter to state house repThomas Briant, executive director of the National resentatives—signed by more than 2,300 store managers Association of Tobacco Outlets (NATO), agreed that local and other company team members—to support a legisla- officials have added to the growing volume of tobacco contive proposal introducing a uniform tobacco control policy trol initiatives that retailers have to live with currently. “Since 2012, NATO has been monitoring and responding in the state. The c-store stated it would alleviate the headaches of “hundreds of different and constantly-changing to tobacco ordinances proposed by boards of health, city local requirements related to pricing, packaging, signage, councils and county boards,” said Briant. “Each year, the product bans, licensing, display methods, age verification total number of ordinances has increased significantly with more than 700 ordinances introduced for consideration in procedures, employee training and more.” Despite the fact that the New England chain was very 2016. For 2017, upwards of 1,000 local ordinances could be active last year in trying to help state officials come to an proposed in localities nationwide.” One of the main reasons local tobacco ordinances such as equitable resolution, Massachusetts’ tobacco laws are still a bans on the sale of flavored tobacco products are being prosubject of intense debate. Anna Bettencourt is the category specialist for VERC posed is because the FDA didn’t prohibit the sale of flavored Enterprises, which operates 24 convenience stores in tobacco products as a part of the agency’s tobacco deeming Massachusetts and two stores in southern New Hampshire. regulations, which took effect on Aug. 8, 2016. Although She sometimes questions whether local legislators under- the deeming regulations extended the FDA’s regulatory June 2017 l Convenience Store Decisions 25

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COVER STORY

“ANOTHER REASON FOR THIS PLETHORA OF LOCAL TOBACCO ORDINANCES IS THAT STATE LEGISLATURES HAVE FOR THE MOST PART NOT ENACTED SUCH RESTRICTIONS AS FLAVOR BANS. SO, ADVOCATES HAVE FOCUSED THEIR RESOURCES ON LOBBYING LOCAL OFFICIALS TO ENACT LOCAL TOBACCO REGULATIONS.” -THOMAS BRIANT, EXECUTIVE DIRECTOR OF THE NATIONAL ASSOCIATION OF TOBACCO OUTLETS

authority to cigars, pipe tobacco, e-cigarettes, vapor products, hookah tobacco, nicotine gels and dissolvable products, these products could continue to be sold, Briant explained. “In the deeming regulation document, the FDA stated that it would propose a regulation to ban the sale of flavored cigars and cigarillos in the future, but no specific date was mentioned when such a new regulation would be issued,” Briant said. Essentially, the FDA left the window open on flavored tobacco—one that state legislators seemingly are moving too slowly to close. “Another reason for this plethora of local tobacco ordinances is that state legislatures have for the most part not enacted such restrictions as flavor bans,” said Briant. “So, advocates have focused their resources on lobbying local officials to enact local tobacco regulations.” PHILADELPHIA FREEZE In some communities it’s flavors, and in others, colors are the topic of the day. For instance, the Philadelphia Health Department this past May chose to limit the amount of permits it allows for retailers to sell tobacco products in areas called “red zones.” In December 2016, city officials issued a Regulation Relating to Tobacco Retailing. The regulation claims that Philadelphia has significantly more tobacco retailers per capita than other comparable cities, and lowincome neighborhoods in the city contain significantly more tobacco retailers than high-income neighborhoods. The regulation also states that high tobacco retailer density and ubiquitous tobacco marketing are associated with increased smoking rates among youth and adults. 26 Convenience Store Decisions

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The city can also terminate cigarette sales permits to stores in a red zone once a store changes ownership. In Philadelphia and many municipalities across the U.S., certain types of businesses are required to purchase government-issued retail licenses that grant license-holding businesses permission to sell certain products under certain conditions. Generally, tobacco retail licensing requires that the city or county issue businesses, new and existing, a license before they are allowed to sell tobacco products. Among the rules in the City of Brotherly Love are: •Prohibiting new tobacco retailer permits within 500 feet, or approximately two blocks, of any K-12 school; • Increasing the tobacco retailer permit fee to $300 to cover costs of enhanced enforcement on sales to children; • Instituting a 12-month tobacco sales suspension for retailers that tally three youth sales violations within a two-year period; and • Establishing a maximum of one tobacco retailer permit per 1,000 people in each planning district. That socalled density cap went into effect Feb. 15, 2017. Red zones also include the banning of cigarettes sales within 500 feet of any school. It turns out more than half of Philadelphia’s 60 7-Eleven stores are located in these so-called red zones, which is going to curb the future expansion of the c-store giant, according to Manzoor Chughtai, president of the Delaware Valley 7-Eleven Franchise Owners Association. Chughtai told Convenience Store Decisions after a recent public hearing with city officials that an additional 35 7-Eleven stores planned within the city of Philadelphia have been suspended. Without a tobacco permit, a store would stand to lose 25-50%

June 2017

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of its gross revenue, as well as sales on additional in-store merchandise purchased with tobacco products. Chughtai owns two Philadelphia stores—each located near a daycare center, which are also included in red zone restrictions. “It’s crazy,” Chughtai said. “I don’t know what direction we’ll go.” It’s a situation where many convenience retailers are being squeezed, said Alex Baloga, vice president of external relations for the Pennsylvania Food Merchants Association, a statewide trade association with more than 1,100 supermarkets and convenience stores. “It’s a significant concern because (tobacco) could be 25% of the business and if you are trying to sell your store, then combine that with the taxes that are already in effect in Philadelphia like the beverage tax and the $2-per-pack tobacco tax and this is the triple whammy or the trifecta of really bad policies impacting retailers in the city,” Baloga said. Philadelphia isn’t the only major metropolitan city to take a progressive position in terms of stiffer tobacco mandates. This past April, New York City Mayor Bill de Blasio and the city council proposed raising the minimum price of pack of cigarettes to $13, reducing the number of tobacco retailers and banning the sale of tobacco products at more than 550 pharmacies. COUNTER CULTURE Increasingly, powerful tobacco control organizations are taking on the tobacco industry at all levels, but locally advocacy groups are gaining major ground. Launched in August 2011, CounterTobacco.Org touts itself as “the first comprehensive resource for local, state and federal organizations working to counteract tobacco product sales and marketing at the point of sale (POS).” The group provides local governing bodies guidance on tactics on how to address the sale of tobacco including: • Ways to cap the number of tobacco retailers. • Ways to cap the number of retailers relative to population size. • How to prohibit retailers from locating near schools and other youth-sensitive areas. • Strategies to target pharmacies that sell tobacco. Another effective tobacco control effort is the Age 21 Movement. According to the Campaign for Tobacco-Free Kids, which launched the project, at least 200 cities and counties in 14 states, California and Hawaii have enacted statewide laws raising the tobacco age to 21. Major cities that have done so include New York City, Chicago, Boston, Cleveland and both Kansas cities. The argument behind the movement is that increasing the tobacco age to 21 will help prevent young people from ever starting to smoke and reduce the deaths, disease and June 2017 l Convenience Store Decisions 27

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COVER STORY There are at least 116 municipalities that enacted local laws that do not contain the same restrictions as California law and qualify as 100% smoke-free for non-hospitality workplaces, according to www.protectlocalcontrol.org. Likewise, numerous California municipalities have adopted laws that expand smoke-free protections to outdoor public places, including patio dining areas, parks, and beaches and shopping districts. That’s not to mention increases on tobacco taxes in the state. Now California consumers will pony up an extra $2 for a pack of cigarettes, bringing some brands closer to $10 a pack.

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CALIFORNIA CODE If Massachusetts is a fragmented cloak of tobacco mandates, the state of California is incrementally moving to become a steady stream of stringent regulation. There are at least 116 municipalities that enacted local laws that do not contain the same restrictions as California law and qualify as 100% smoke-free for non-hospitality workplaces, according to www.protectlocalcontrol.org. Likewise, numerous California municipalities have adopted laws that expand smoke-free protections to outdoor public places, including patio dining areas, parks, and beaches and shopping districts. That’s not to mention the tidal wave of tobacco taxes that regularly washes over smokers, including the last election. Smokers can thank California voters, who on last Nov. 8, voted yes on Proposition 56—the biggest tax on cigarettes since the state began taxing tobacco in 1959. Now California consumers will pony up an extra $2 for a pack of cigarettes, bringing some brands closer to $10 a pack. Most retailers agree that tobacco and other age-restricted products should not be accessible to those under the legal age of consumption. That’s the position that Robinson Oil Corp. dba Rotten Robbie holds. The 35-store chain is active in local tobacco legislation initiatives, said Reilly Robinson Musser, vice president of marketing & merchandising. The county of Santa Clara recently banned flavored tobacco in Los Gatos, Calif. The ban will go into effect Jan. 1, 2018 and includes laws on how close new retailers can be to a school or park. Musser acknowledged that the company moved too late to provide its input on the ban. “We need to do a better job of this—and recognized it after the Los Gatos town council meeting,” said Musser. “The tobacco ordinances seem to pop up quickly with little notice and we need to try and speak with officials ahead of time to get our message across prior to any public hearings.” CSD

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CATEGORYMANAGER’S NOTEBOOK

Cigarettes Remain On Top Although smoking rates have been on the decline, cigarettes remain a leading performer for convenience stores. By Lisa White, Contributing Editor

N 2016, CONVENIENCE STORES captured 85% of all sales PUBLIC OPINION Of course, legislators continue to have a say on how easy through sales from just six categories: Cigarettes, packaged beverages, candy, beer, salty snacks and other it is for cigarette consumers to purchase tobacco. For examtobacco products (OTP), based on the latest research ple, California’s cigarette tax this April 1 increased by $2 a pack under new tobacco policies passed by state legislators data from the Nielsen Co. According to the National Association of Convenience last November. This more than tripled the state’s former 87-cent-per-pack cigarette tax. Stores (NACS) State of the A recent survey by New Industry (SOI) data projections, York’s Wells Fargo Securities cigarettes and OTP comprised found that, despite California’s 36% of in-store sales in 2016, tax hike and the continued volahead of foodservice (21.7%), ume deceleration of the cigarette packaged beverages (15%) and industry, products from larger center of the store sales (9.8%). manufacturers continue to be NACS’ SOI report indicated strong sellers in c-stores. that smoking rates in the U.S. Based on results from Wells continue to decline, thus chipFargo’s “Tobacco Talk” surping away at cigarette’s share vey of retailer and wholesalers of in-store c-store sales, which representing roughly 25,000 dropped from 36.9% in 2011 to convenience stores in the U.S., 31% in 2016. retailers expect Newport to gain And though tobacco prodmore than 70 base points in maructs, including cigarettes, were ket share and win even greater more than a third of in-store shelf space in 2017, according to sales dollars, they accounted for Bonnie Herzog, managing direconly 18.2% of gross profit doltor-equity research, beverage, lars, NACS reported. To muddy household and personal care, the numbers more, the developtobacco and c-stores for Wells ment of new tobacco products to accommodate consumers moving away from combustible Fargo Securities. Retailers expect Marlboro to maintain share leadership and gain between 10 and 20 base points in tobacco is also affecting total market figures. Some industry analysts anticipate a long-term average market share in 2017. “We believe Reynolds American Inc. (RAI) remains strongly decline of 4% in cigarette volumes as tobacco manufacturers continue to develop newer products such as iQOS smoke- positioned for share gains, leveraging Newport to drive faster growth across its portfolio and meaningful margin expanless cigarettes to maintain revenue levels. Those manufacturers include Altria Group, parent com- sion,” Herzog said. “However, there are signs of widening pany for Philip Morris USA, which reported this past May price gaps and downtrading, which will likely impact midthat domestic cigarettes shipment volume declined by 2.7% tier brands the most. This is due to rising gas prices and other wallet pressures affecting lower income groups.” in the first quarter. 30 Convenience Store Decisions

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CATEGORYMANAGER’S NOTEBOOK TOP C-STORE BUSINESS DRIVERS IN 2016 Sales $

% of Total Sales

Cigarettes

$53 B

38%

Packaged Beverage

$28 B

20%

Beer

$17 B

13%

Category

Source: The Nielsen Co. C-Store Data, 2017

With London’s British American Tobacco’s (BA) recent $49.4 billion takeover of RAI, it remains to be seen what impact, if any, this will have on the cigarette segment in c-stores. “There’s little you can do with Altria and Phillip Morris, who fight with R.J. Reynolds for space,” said Eric Huppert, co-owner of Team Oil Travel Center, located in Spring Valley, Wis. “If I have 10 square feet for cigarettes and they have access to a wholesaler, they know how many packages they sold and how many their competitors sold. If they say they’re 60% of our market, they get 60% of our back space. If they don’t get this space, then we don’t get the product discounts.” Huppert claims the price fixing atmosphere created by cigarette wholesalers favors them and consumers at the expense of c-store retailers. “The wholesalers will give us a bigger buy down or X amount for a carton of cigarettes if we sell them for the price they give us, and it’s such a low margin,” said Huppert. “By giving away cigarettes at this margin, we draw in more customers, but if all four stores by us do the same deal, it’s the wholesalers that are benefitting as well as the smokers. I have a full rack or 150 packs of cigarettes I’ll be trying to sell that I paid $7.50 a piece for and have to sell for $6 a pack to get them out of here because it’s all about volume.” Team Oil’s grocery sales are about $15,000 a week, with between $8,000 and $9,000 in cigarettes. “This means I’m making a 10% margin on the cigarettes versus 30-40% on the rest of the grocery items,” said Huppert. “Cigarettes are as close to gas [in terms of being a low-margin, high-volume product] as it gets.” The fact remains that travelers get disgruntled with higher prices compared to where they live, he said, and people will go out of their way to find the cheapest cigarettes. Still, Team Oil Travel Center’s sales remain consistent, with cigarette sales not being impacted by e-cigarette or vapor products. “Regardless of the economy, the vices like cigarettes and booze still sell,” said Huppert. “Very few smokers that try electronic cigarettes stay with them; they’ll typically go back to traditional cigarettes.” 32 Convenience Store Decisions l June 2017

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Kizer Couch, co-owner of Bend, Ore.-based The Growler Guys, which has seven retail locations in Oregon and Washington State, also has seen no significant changes in his cigarette business. “Cigarette companies are always changing descriptions, pricing structures and buy downs to compete with each other, but nothing noteworthy is happening right now,” Couch said. The stores’ biggest sellers are Camel and Marlboro, both in regular hard packs. “This is because both brands are doing a lot of promotions, with Camel discounting on the 99s and Marlboro discounting on its new off flavored packs like Blacks,” said Couch. “We’re not seeing any impact from e-cigs or new regulations.” EXCISING OBSTACLES What many experts are saying is it’s the continued hike in excise taxes having the most impact on c-store cigarette sales and the segment as a whole. “The net result is more cigarette smuggling,” said Michael LaFaive, director for fiscal policy at the Center for Public Policy, based in Midland, Mich. So far, the campaigns to cut these taxes have not been successful, although regulations have been introduced. To put it in perspective, the average excise tax on a cigarette pack was 38.9 cents in 1999 and in 2017 it’s $1.60. According to the Washington, D.C.-based National Association of State Budget Officers, states have increased tobacco taxes about five times as often as they have raised alcohol taxes between 2000 and 2015, with more than 130 increases in the last 17 years. The result has been smokers going to states with the cheapest excise taxes to purchase product. For example, California residents can cross the border to pay significantly lower per-pack excise taxes in Oregon ($1.32), Nevada ($1.80) and Arizona ($2). Also, there is evidence that those with a strong prevalence to smoke who cannot support their habit are turning to illegal trade. “Raising excise taxes on cigarettes has unintended consequences and will not reach the intended goals,” said LaFaive. “Instead, the imposed taxes are undermined because it creates an incentive to find an illegal way to obtain these items.” Looking ahead, the cigarette segment is expected to stay on its current course, despite increased competition from newer products like iQOS, and Grinds, a coffee product looked upon by some analysts as an alternative to smokeless tobacco. Although 11% of Team Oil’s R.J. Reynolds’ sales are from VUSE products, the e-cigarette brand isn’t the most consistent seller for Huppert. “When a smoker is a smoker, they want a cigarette,” he said. CSD CStoreDecisions ecisions .com

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CATEGORYMANAGER’S NOTEBOOK

Reacting

to Market Influences From regulations to shifting consumer demand, e-cigarettes remain susceptible to various factors. By Anne Baye Ericksen, Contributing Editor

N THE SURFACE, E-CIGARETTES are performing well in terms of OTP (other tobacco products) category sales. Information Resources Inc. (IRI), a Chicagobased market research firm, reported total sales of all electronic tobacco devices—e-cigarettes and vapors/ tanks/mods—in U.S. convenience stores totaled more than $71.8 million for the four weeks ending March 19. That represents a 27.06% increase for the same time period during the previous year. Unit sales jumped more than 21% for the four weeks. For the 12 weeks ending March 19, the pace slowed slightly with a 24.44% increase in dollar sales and 18.80% boost in unit sales. And a 52-week comparison for U.S. c-store sales of electronic tobacco products reveals an even more tepid progression. IRI indicated sales grew by less than 17% and unit sales also registered approximately 17% growth. Comparably, dollars sales for e-cigarettes in all retail channels increased by one-third, and volume climbed 23.6%, according to research data by The Nielsen Co. and reported by Wells Fargo Securities for the four weeks ending April 22. However, dollar and unit sales alone don’t paint a complete picture. Research often calculates activity on a national basis, but local influences are proving a big difference for c-stores. For example, the e-cigarette segment has never been a major profit generator for the 11 retail stores owned and operated by Scrivener Oil Co. “Sales are slower in 2017 versus previous year-to-date. In fact, we have cut the majority of the products in our stores. In addition, our distributor has cut several brands,” said Sean Bumgarner, vice president for the Ozark, Mo.based chain. “I think the e-cig consumer has been trained to shop at vapor stores due to the tremendous variety offered,” 34 Convenience Store Decisions

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June 2017

Bumgarner added. “We have many vapor stores in [our] markets and they do a great job at educating and sampling.” The reasons for customer preference vary. Two are product variety and accessibility. “I see quite a bit of variability from one store to the next in terms of e-cigarette volume and contribution to overall inside sales,” said Jim Calvin, president of the New York Association of Convenience Stores. “Local market conditions, extent of vape shop competition, and retailer commitment to the category seem to be factors.” New taxes on e-cigarette sales are another market factor. Last year numerous tax increases sprung up in pockets across the country. Perhaps one of the most detrimental tax hikes to date is Pennsylvania’s 40% wholesale tax. Not only were retailers, including c-stores, faced with that hefty levy, they also were subjected to the same 40% wholesale cost tax on vapor products that applies not only to purchases made after Oct. 1, 2016—the day the tax took effect—but also covers all inventory on store shelves. According to the Pennsylvania Vaping Association, 120 businesses closed their doors as a result. The good news is that state lawmakers are considering amending the law due to the inordinate financial burden it placed on businesses. As of early May, the Senate Finance Committee advanced a bill that would lower the wholesale tax to five cents per milliliter. Still, other states continue to contemplate tax increases and other regulations, including New York. “In January, Governor [Andrew] Cuomo proposed a new state excise tax on vaping products at 10-cents per milliliter, but it was not enacted,” said Calvin. “Some counties have enacted public place vaping bans, and there is pressure at the state level to do so. The New York City Council is considering broad new restrictions on e-cigarettes and e-cigarette retailers.” CStoreDecisions ecisions .com

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CATEGORYMANAGER’S NOTEBOOK

PRICE IS RIGHT The trend to raise retail prices continues and could account for some of the dollar sales increases. Wells Fargo Securities stated pricing climbed by 8.1% for each the fourweek and 12-week periods ending April 22. Additionally, discounting programs may be what is pushing up unit sales. “While we are not clear how much this skews our ability to gauge organic brand-level performance, we believe the discrepancy could be rather significant given the magnitude of couponing we understand is occurring presently in the category,” stated Bonnie Herzog, senior analyst for Wells Fargo Securities. “For example, we have heard in the past of significant ‘coupon drops’ driving sales of MarkTen XL and similar tactics employed by Logic and VUSE.” Regardless of various influences, it seems the e-cigarette industry has settled into a predictable hierarchy, at least in terms of how revenue share is divvied up between brands. Since October 2014, VUSE, by Reynolds American Inc., has dominated in nearly all retail channels. For the latest period, it claimed 40% of total retail sales in convenience stores up to April 22, per Nielsen and Wells Fargo Securities. In fact, it’s held firm at 35% or more of the revenue mix since October 2015. Meanwhile, most other brands have either lost share or maintained a lower plateau. MarkTen XL has shown the most sustained growth, which helped Philip Morris, a division of Altria Group Inc., capture between 13-16% during the past 12 months. Before VUSE, blu commanded top market position;

C-STORE E-CIGARETTE SALES E-CIGARETTES STILL RING UP strong c-store sales for the OTP (other tobacco products) category, generating $832 million for the 52-week period ending April 22, 2017.

$832 Million

52-Week Period

Top E-Cig Maker Share

Total Annual Sales

% of Total E-Cig Sales

E-Cigarettes Total

Reynolds American Inc.

$333 Million

40.00%

Altria Group Inc.

$142 Million

17.10%

Imperial Tobacco

$115 Million

13.80%

Japan Tobacco

$102 Million

12.30%

PAX Labs

$78 Million

9.40%

CB Distributors

$17 Million

2.00%

Njoy Inc.

$16 Million

1.90%

Source: Nielsen C-Store Data and Wells Fargo Securities LLC, U.S. results from c-stores for the 52-week period ending April 22, 2017

36 Convenience Store Decisions l June 2017

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however, over the past two-and-a-half years, it regularly has posted smaller growth margins. Logic has hovered at approximately 12% since May 2016, while NJOY noted less than 5% of the e-cigarette revenue mix since it declared bankruptcy last September. LEGISLATIVE LANDSCAPE Of course, a discussion of the current and future performance of e-cigarettes would not be complete without examining the effect from by the U.S. Food and Drug Administration’s (FDA) decision to classify electronic tobacco products the same as combustible cigarettes, making them subject to the same level of regulation. The agency allotted manufacturers one year to submit applications for a substantial equivalence (SE) exemption, until February 2018 to turn in SE applications, and until August 2018 to provide Premarket Tobacco Applications (PMTAs). The FDA then has another year to review submissions and make a final determination. An FDA spokesperson confirmed it’s received 364 PMTAs across all tobacco product categories, including cigars, between August and December last year. “What the FDA [isn’t saying] is whether or not it has refused to file any those of those applications,” said Gregory Conley, president of the American Vaping Association. “I will bet not many of the PMTAs will be read until after August 2018.” DEFINING PERCEPTION Also, differing studies debating the health concerns of e-cigarettes have created confusion among consumers. On May 8, the first E-Cig Summit USA-Science Regulation & Public Health forum was held to discuss evidence regarding harm reduction and policy possibilities. It was attended by approximately 250 representatives from the scientific, public health, legal/government, tobacco industry, consumer advocacy and user communities. “This was the first time in our memory that such a diverse range of U.S. tobacco/public health interests were represented in one room,” said Herzog. “On balance, we found the presenters to be fairly uniform in view on e-cigs/ vapor being ‘dramatically less harmful’ than smoking even through the evidence may not yet support e-cigs as an effective smoking cessation choice or fully-satisfying alternative to conventional cigarettes.” Of course, the conversation doesn’t end there. “Where the experts appeared to disagree was on regulation and how far it should go to limit consumer choice in terms of flavor, nicotine strength, and styles,” Herzog added. Until these factors reach some sort of resolution and provide consistent messaging to consumers, the e-cigarette category remains vulnerable to market fluctuations. CSD CStoreDecisions ecisions .com

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CATEGORYMANAGER’S NOTEBOOK

Optimistic About

Vapor

Even though sales of vaping products appear to be on the upswing, c-stores remain cautious about the category’s future. By Anne Baye Ericksen, Contributing Editor

EFORE THE U.S. FOOD and Drug Administration The brand includes kits, personal vaporizers and e-liquids. “The [vaping category] products just keep improving,” (FDA) in 2016 released its final deeming regulations that classified vapors, tanks, mods (VTMs) and Badgley added. Tim Greene, category director of tobacco and general e-liquids as tobacco products, sales had been trailmanager of the Cigarette Store Corp., dba Smoker Friendly, ing off from the previous year’s momentum. In 2015, e-liquids was the fastest-growing individual has noticed a growing trend, moving away from openvapor products segment, with a 57% value sales increase to system devices and toward closed systems. The Boulder, reach $1 billion, according research data from Euromonitor Colo.-based chain operates 103 stores in five states, includInternational. The e-liquids category’s countless combina- ing 20 Gasamat convenience stores that offer fuel. “In the past, equipment was changing so fast and everytions of flavors and nicotine strengths proved enticing to consumers looking for alternatives to combustible cigarettes. one wanted the latest and greatest. Now we pretty much However, due to market pressures, the vapor category have what we had last year. Equipment [sales are] mostly struggled in 2016, the vapor category third quarter growth way down, about 15-18%. Liquids are down 8-10%,” Greene was 3.2%, but dipped to just 1% growth in the fourth quar- said. “However, what we are seeing is a shift toward bigger mods with closed systems. VUSE has Vibe [a prefilled tank ter of 2016, according to Wells Fargo Securities. system] out now that’s bigger and better.” So far this year, JUUL continues to be his top-seller, but WHAT’S TRENDING NOW That was last year. 2017 appears to be producing a more Greene recently added the Cue Vapor System line. In March, promising environment for vaping products. In its Tobacco E-Alternative Solutions, a sister company of cigar leader Talk Q1 U.S. Retailer Survey, dated April 26, Wells Fargo Swisher International, launched a national advertising camSecurities analysts estimated vaping product sales in the paign for its new closed system vaping device. It’s available first quarter will reach an impressive 6.9% increase in sales in four flavor categories: tobacco, mints, desserts, and fruits. compared to the previous quarter. Still, feedback from It also offers users three nicotine levels: zero-, three- and retailers leave mixed impressions. Statements to the survey six-milligrams. “We’re testing it. It’s gone well, but not gangbusters,” included, “Only slight growth in c-stores, but still strong in vape shops,” as well as “Lots of our stores have taken these said Greene. “However, we’ve also had some feedback that the pod is not big enough. Users are going through carout completely.” At MotoMart stores, performance for both vapor prod- tridges too quickly for the price. Also, some customers have asked for stronger nicotine levels and new flavors. We’ve ucts and e-cigarettes has improved over 2016. “Sales are up 30% over last year,” said Todd Badgley, launched it with seven flavor SKUs. It’s too early to tell if president of the FKG Oil division, based in Belleville, Ill., it’ll be really successful.” Consumers appear to prefer rechargeable e-cigarettes which owns and operates 79 retail sites throughout six Midwest states. “We look at e-cigs and vapor as one cate- and vaporizers more than disposables. In year-to-year comparisons for first quarter market share in all retail gory, so these numbers include both.” In fact, rather than paring down SKUs like some businesses, channels, Wells Fargo Securities research showed rechargeBadgley expanded the category by adding VaporX products. ables jumped more than 10 percentage points, whereas 40 Convenience Store Decisions

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June 2017

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CATEGORYMANAGER’S NOTEBOOK “THIS YEAR HAS NOT BEEN A BLOODBATH. I DON’T THINK WE'VE HAD ANY TAXES PASSED THIS YEAR; HOWEVER, FLAVOR BANS ARE INCREASING IN CALIFORNIA.” -GREGORY CONLEY, PRESIDENT, THE AMERICAN VAPING ASSOCIATION

wide 21 minimum age requirement, and nine other states have bills aimed at raising the age still pending. “This year has not been a bloodbath. I don’t think we’ve had any taxes passed this year; however, flavor bans are increasing in California,” said Gregory Conley, president of the American Vaping Association. Indeed, some of the legislative activity this year has been to lessen the tax burden placed on vaping sales. In Pennsylvania, the Senate Finance Committee advanced a bill that would lower its 40% wholesale tax on all vaping products to five cents per milliliter. According to the Pennsylvania Vaping Association, since the prohibitive tax went into effect last fall, 120 businesses have closed. “Kansas is one step away from reducing its 20-cents-per milliliter tax to five cents,” said Conley. Perhaps the most encouraging sign the industry will continue on a positive trajectory is the confirmation of Scott Gottlieb as the new FDA commissioner with a 57–42 vote in the U.S. Senate last month. Gottlieb previously had a relationship with Kure, an e-cigarette manufacturer. “There’s some reason for optimism about the possibility of smart reform on these products because he’s a nominee who seems to understand these products,” said Conley. What’s more, the federal government postponed the substantial equivalence exemption application date by three REFRESHED OPTIMISM Last year was also monumental in the number of bills months, from this August to November. The deadlines introduced and passed to increase taxes on tobacco products, for both the SE application, February 2018, and Premarket including vaping devices and e-liquids. Additionally, numer- Tobacco Application (PMTA), Aug. 8, 2018, remain unchanged. ous municipalities voted on raising the minimum purchasing By all accounts, this is an expensive and timely endeavor, and age to 21 as well as curtailing where individuals could vape industry watchers continue to project a percentage of small in public. California joined Hawaii in implementing a state- producers will close shop rather than incur these costs. In fact, ProVape, a vaping device manufacturer, announced it is shuttering operations. However, the Cole-Bishop Amendment, which proposes changing the predicate date for the FDA deeming from Feb. 15, 2007, to Aug. 8, 2016, so it could grandfather in most E-LIQUIDS AND VTMS CONTINUE to fall short of disposable e-cigarettes in all products currently on store shelves, didn’t retail channels. make it into the spring budget bill. Disposable VTMs/Personal “The number of lawmakers who E-liquids e-cigarettes Rechargeables Systems understand why the predicate date is an 2015 1Q 33% 34% 11% 21% issue and think it’s a problem that should be solved is increasing,” said Conley. 2016 1Q 36% 35% 12% 17% “The question is how to get them to do 2017 1QE 36% 47% 16% 1% anything.” CSD

disposable e-cigarettes remained steady at 36% for both 2016 and 2017. As Greene noted, VTMs/personal systems fell off significantly over the past 12 months, to 1% from a robust 17%. The biggest buzz, however, continues to surround the anticipated release of iQOS by Philip Morris, a division of the Altria Group Inc. The company submitted its application to the FDA late last year, and analysts project the product will be approved and ready for sale by late 2017 at the earliest. Even though that’s still months away, retailers are placing high hopes on consumer interest in the reduced-risk product that heats tobacco instead of burning it. Phillip Morris is reported to have already invested in the neighborhood of $3 billion in research and development behind iQOS. According to the recent Wells Fargo Security “Tobacco Talk” Survey, more than three-fourths of respondents expressed optimism about iQOS representing the next growth catalyst for the industry and plan to add it to their inventory. What’s more, nearly half anticipated increasing shelf space when the device is released. “On the liquid side, there’s also synthetic nicotine and nicotine salts that are getting some tread. We’re looking at them, but haven’t carried them yet,” said Greene.

REVENUE MIX OF E-CIGARETTES VS. VTMS/ PERSONAL VAPORIZERS

Source: Wells Fargo Securities LLC, April 26, 2017

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Join us for the 2017 National Advisory Group conference!

September 10 thru13 th

The National Advisory Group (NAG) is an association of small, mid-sized and family-owned chains and the executives that run them. This group convenes at an annual conference to exchange ideas with the motivation to improve their business performance and ultimately their bottom line. The setting of this conference encourages an extremely educational, yet highly social environment. The schedule consists of top-notch speakers, retailer information exchanges, opportunities to address the burning issues within your business, a chance to get to know your peers in similar size operations and much more!

THANK YOU TO OUR SPONSORS:

Nashville, TN Downtown Hilton

Visit www.nagconvenience.com for more information 2017 NAG 4-pager.indd 1

5/24/17 1:08 PM

Sunday, September 10, 2017

10:30-10:45 am: Break

1:00 – 7:30 pm: Registration

10:45 – 12:15 pm: INFORMATION EXCHANGES PART 1 The Information Exchanges are the heart and soul of what makes NAG so unique. Attendees will be formed into small groups of non-competing chains to discuss relevant business issues. We all want uninterrupted time with people who “do what we do,” but rarely do our busy lives allow us the luxury of benchmarking what we do and how we do it with other professionals. As you listen, learn and share with your small group of retailers, you will find that what you are doing right will be validated, what you might be doing wrong will be challenged, and how you might do things better will be encouraged. The relationships formed in this intimate setting will last a lifetime and be firmly measured in increased profitability and decreased legal liability.

1:00 – 4:00 pm: Pow Wow Room Open 4:00 – 5:00 pm: NAG/YEO Board Meeting 6:00 – 7:00 pm: NAG Welcome Reception Hosted by the Young Executives Organization 7:00 – 9:00 pm: NAG Dine-Around at the Hilton Nashville Downtown 9:00 – 12:00 am: NAG Hospitality Room

Monday, September 11, 2017 7:00 – 8:00 am: Breakfast 8:00 – 8:15 am: Welcome/Conference Overview by NAG Executive Director John Lofstock 8:15 - 9:15 am BURNING ISSUE 1: The Impact of Family Business on Convenience Retailing: Since the inception of the modern convenience store industry more than 75 years ago, c-stores have provided the foundation for retailing excellence. This commitment to excellence begins with an outstanding corporate culture and an unwavering loyalty to employees and customers. So while bigger corporate entities have their sights set on family-owned chains—as much for their superior culture as for their balance sheets— they cannot replicate the value family businesses have in the communities they serve. In this session, hear from three of the convenience store industry’s most respected chains about their commitment to employees, customers and the tradition of family-owned business. SPEAKERS: • Joseph Sheetz, President and CEO, Sheetz Inc. • Jeff Miller, President and CEO, Miller Oil Co. Moderator: John Lofstock, Executive Director, the National Advisory Group 8:46 am: Moment of Silence in Observance of 9/11 9:15-9:30 am: Break 9:30-10:30 am: BURNING ISSUE 2: Navigating Stafﬁng: Attracting, motivating and Retaining Millennials. Words used to describe Millennials: entitled, lazy and spoiled as well as tech-savvy and smart. As the largest generation in the workforce, they aren’t going away. Those retail organizations that learn how best to lead Millennials will have a competitive advantage in the marketplace. The process begins with understanding why they are different from prior generations and what motivates them in the workplace. The answers may surprise you. SPEAKERS: • Cherrie Clay Clark, Professor of the Practice of Management at the Owen Graduate School of Management, Vanderbilt University Moderator: Jonathan Ketchum, Senior Vice President of Retail, Alon Brands

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12:15 – 1:15 pm: Lunch 12:45 – 5:00 pm: NAG Golf Outing, Hillwood Country Club Nashville (boxed lunch will be served.) 1:15 – 5:00 pm: Free Time/Spouse Events 6:30 – 9:00 pm: Retailer/Supplier Dinners to Experience Nashville 9:00 pm – 12:00 am: NAG Hospitality Room

Tuesday, September 12, 2017 7:00 – 8:00 am: Breakfast 8:15 – 9:15 am: BURNING ISSUE 3: Competing On Fuel: Understanding RIN’s, alternative fuels and declining gallon sales. The Renewable Fuel Standard (RFS) is changing fuel economics across the country and not for the better. Credits for renewable identiﬁcation numbers (RINs) are escalating and convenience store chains are having a harder time competing on price and in some cases they are being forced to retail fuel at a loss. Combined with these regulatory requirements, enhanced fuel-efﬁcient vehicles and alternative power sources are muddying gasoline’s future. Learn what you can do to protect fuel sales to remain competitive in the gasoline business. SPEAKERS: • Stanley Roberts, President & CEO, Capital Oil Inc. • Wendy Chronister, President & CEO, Chronister Oil Co. Moderator: Suzanne Murray, Partner, Haynes and Boone, Lead Counsel for the Small Retailers Coalition

5/24/17 10:52 AM

9:15 - 9:30 am: Break 9:30 - 10:30 am: BURNING ISSUE 4: The Future of Fresh Foods in Retail: As consumers increasingly seek fresh options in convenient formats, retailers are rising to meet the demand. While customers have a tendency to talk healthy and eat otherwise, there is a clear need for quick, healthy foodservice solutions and convenience stores are in a prime position to meet this demand. Driven by the consumer’s demand for convenience, food retail concepts, formats and locations are converging. Today’s shoppers are pushing convenience retail businesses to expand, invest in fresh foods and provide a consistent brand experience. SPEAKERS: • William Baine, CEO, Git’N Go Market • Brenda Gerow, Vice President, Branding/Marketing & Human Resources, R.H. Foster Energy • Mario Spina, CEO, The PRIDE Stores Inc. Moderator: Matt Lally, Manager, Analytics & Insights, Nielsen Perishables Group 10:30 - 10:45 am: Break 10:45 am - 12:00 pm: BURNING ISSUE 5: Developing Real Estate: How to Find and Invest in Great Locations: The retail industry is more dynamic than ever. Retailers must evolve to succeed over the next decade. However, the cost of real estate continues to rise so convenience store operators must make wise decisions about how to develop properties. This includes capital investments, site selection, store design and layout and the service offered. Other strategies, such as sale-leasebacks, can help c-stores access capital to acquire new locations. This session will explore the best practices of real estate development to help retailers stay ahead of the competition. SPEAKERS: • Charlton Bell, Senior Vice President of Facilities, Tri Star Energy • Robert Buhler, President & CEO, Open Pantry Food Marts • Jack Kofdarali, President & CEO, J&T Management Inc. Moderator: Mark Radosevich, President, PetroActive Services 12:00 - 1:00 pm: Lunch 1:00 – 2:30 pm: Information Exchanges Part 2 2:30 - 2:45 pm: Break 2:45 - 3:45 pm: YOUNG EXECUTIVES ORGANIZATION (YEO) BREAKOUT SESSION: What does omnichannel mean to convenience retail? Omnichannel retail is a multichannel approach to sales that seeks to provide customers with a seamless shopping experience whether the customer is shopping in-store, online or from a mobile device. What distinguishes the omnichannel customer experience is that there is true integration between channels on the backend. Using an omnichannel approach means retailers know and respond to their customers’ shopping preferences and can tailor marketing efforts to meet their needs. Presenting a uniﬁed physical and digital customer experience in the age of Amazon is an essential requirement for today’s convenience stores.

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SPEAKERS: • Pat Lewis, Partner, Oasis Stop ‘N Go, Twin Falls, Idaho 5:30 – 6:30 pm: NAG Reception Hosted by the Young Executives Organization (YEO) 6:30 – 9:00 pm: NAG Conference Dinner & Awards Ceremony 9:00 pm–12:00 am: NAG Hospitality Room

Wednesday, September 13, 2017 8:00 – 9 am: Breakfast 10:45 am - 12:00 pm: BURNING ISSUE 6: Foodservice: Delivering the goods. UberEats and Amazon have muscled into the foodservice market and are changing how consumers purchase their meals. Other services like Doordash and Instacart are also gaining momentum, keeping customers away from convenience stores in favor of home delivery. Emerging services such as Munchery deliver food directly from commissaries, bypassing the brick-and-mortar stores altogether. To remain competitive, convenience store operators must keep pace to maintain sales in this crucial category. SPEAKERS: • Bonnie Riggs, Director, Industry Analyst – Foodservice, The NPD Group Moderator: Ed Burcher, Chief Operating Ofﬁcer, Coen Markets 10:15 –10:30 am: Break 10:30 am –12:00 pm: IDEAS BOOT CAMP: Game-changing ideas retailers can take home with them that are guaranteed to boost retail proﬁtability. 12:00 pm: Conference Wrap Up and Takeaways (Speakers booked through March 25)

5/24/17 10:53 AM

As the convenience store and petroleum industry continues to evolve, training the leaders of tomorrow is more important than ever before. To help young executives have a group that is solely focused on exchanging personal experiences with peers in their age group, the National Advisory Group (NAG) is proud to announce that it has relaunched the Young Executives Organization (YEO). YEO’s mission is to cultivate young talent in the convenience store and petroleum industry through implementation of education and networking. YEO accomplishes this mission by leveraging the experience of NAG members to help foster superior leadership skills. YEO members are industry leaders who are approximately 40 years of age or younger. Members are entrepreneurs, leading top businesses and actively pursuing a higher level of professionalism in the convenience store and petroleum marketing industry. Membership in YEO provides young convenience store and petroleum industry executives with an opportunity to network with other NAG members and inﬂuential industry leaders. It also gives young executives a platform to express their ideas, leadership abilities and vision for the future of convenience retailing. Membership in YEO is open to all NAGmember company employees at no cost. If you are not a NAG Member, join NAG now at www.nagconvenience.com. If you are a young executive or if your operations has a young up-and-coming executive please join us in Nashville! For additional information, contact John Lofstock at jlofstock@csdecisions. com or YEO Board Chairman Jared Sturtevant at jared.sturtevant@ cstbrands.com.

PGA Class A Head Professional Mike Lathrop oversees the 18-hole, par 72 golf course at Hillwood Country Club. Originally designed by legendary golf architect Dick Wilson, the 7,000+ yard course opened for play in 1957 and was renovated by Bruce Hepner of world-renowned Renaissance Golf in 2003 & 2011. HOW TO REGISTER Go to: www.nagconvenience.com. NAG will conﬁrm your hotel room and your meeting registration. A credit card number must accompany your registration. HOTEL PRICING

A block of rooms has been reserved for the NAG Conference at the special rate of $249/night, inclusive of guest room, high speed Internet and exclusive of taxes. Your hotel costs are NOT included in the cost of the conference and should be booked through the NAG registration site. Please make your room reservation by 8/7/17. It is NOT necessary to call the hotel. Please contact the NAG Event Coordinator for suite pricing and availability at NAGRegistration@mocandco.com.

CONFERENCE REGISTRATION RATES Member Super Saver available until July 11th: Super Saver Price, $549 Early Bird July 12th - August 11th: Early Bird Price, $699 Standard August 12th onward: $749 Non-Member Super Saver available until July 11th: Super Saver Price, $649 Early Bird July 12th - August 11th: Early Bird Price, $799 Standard August 12th onward: $849 Spouse/Guest $399 Registration for the conference is open to retailers only at this time. Suppliers interested in attending should contact info@nagconvenience.com.

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The National Advisory Group (NAG) is an association of small to mid-size and family-owned convenience store chains and the executives who run them. Members meet annually to exchange ideas with the motivation to improve their business performance and ultimately their bottom line. The setting of this conference encourages an extremely educational, yet highly social environment. The schedule consists of top notch speakers, retailer information exchanges, opportunities to address the burning issues within your business, a chance to get to know your peers in similar size operations and much more! For information on NAG membership or NAGâ&#x20AC;&#x2122;s Young Executives Organization (YEO) contact NAG Executive Director John Lofstock 201.837.2177 â&#x20AC;˘ jlofstock@csdecisions.com

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5/24/17 9:16 AM

CATEGORYMANAGER’S COLUMN

Smokeless Makes a Comeback A recent manufacturer’s recall of several popular smokeless brands produced some unexpected benefits for retailers. By Andrea Myers

HE LAST TIME THERE was so much chatter in the indus- BENEFACTORS “Grizzly, by far, was the biggest brand beneficiary, gaintry about smokeless tobacco was when the two largest American cigarette manufacturers acquired the two ing a little more than 5% share of market, which for now is largest American smokeless companies. Those were holding. The hardest part was the hassle it caused in having to explain why there were out-of-stocks on brands such exciting times. On Jan. 31, 2017, U.S. Smokeless Tobacco Co. recalled as Skoal or Copenhagen, and then offering an alternative,” several major brands of smokeless tobacco sold nationwide said Doug Nolan, vice president of Smokers Choice, which after customers complained of metal shavings. The fallout operates 56 tobacco outlets in NY and Pennsylvania. “The problem also helped certain company staff members as from the recall has been a challenge for retailers ever since. they learned more about The problem was the category, engaging quickly announced to smokeless consumers the trade with letters more in the process.” and listings of products A number of retailers affected, which included I spoke to said the situaa voluntary recall notice tion was the best training to the U.S. Food and on moist snuff their Drug Administration employees might ever (FDA). Once the iniget. “Our staff sells moist tial public information all day long, and virtusurfaced, the company ally all of the customers clearly communicated know what they want the each week what prodminute they walk in the ucts were disrupted door,” said Ben Reinhart and when the probof Smokers Host, a highlems would be resolved. volume, 14-store chain in However, the letters Indiana. “But when we kept coming and soon the industry knew the problem would not be easily fixed. were out of their normal brand, our folks had to learn what Frustrated retailers opened their totes each week and culled other products to recommend, and they learned a lot from through their invoices to see how bad the scratches would our consumers who told them why they liked this or why they didn’t like that.” be on these c-store staples. Not unlike what happens when a hurricane is announced The good news is the supply disruption of America’s best-selling brands appears to be coming to an end. But in south Florida and people run to the store in a panic to what had at first appeared to be an isolated problem at a stock up on supplies, the same thing occurs when items factory sent ripples throughout the wholesale and retail (any popular items) run out of supply—orders are douworld of tobacco. This didn’t mean, however, that the sit- bled and tripled to make up for the lost sales and inventory. uation didn’t offer an opportunity for those retailers who These “runs” on product are not unusual, but they are difficult to fix, and only settle once a full supply of products is were savvy enough to find the silver lining. Today, moist snuff sales seem to be flat, with consum- in the pipeline and the market is confident that shortages ers moving to other products within the smokeless category. are a risk no longer.

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CATEGORYMANAGER’S COLUMN Retailers with the space and selection broader than a typical convenience store fared best for two reasons: subcategory diversity and total tobacco diversity. For example, discount tobacco stores carry a broader selection of smokeless products, which allowed consumers alternative choices, and these result in a greater opportunity to fulfill a consumer’s desire for a smokeless product alternative if their usual brand was not in stock. Secondly, these stores have a much wider array of tobacco products and accessories compared to a convenience store that has little or no space for these products, which means while smokeless is a critical category for them, they have a broader base of tobacco products, which dilutes their dependence on any one particular category. CATEGORY-WIDE Another effect of the disruption was an unexpected price increase on cigarettes in March. While no official statements were made linking the two events, industry insiders and outside analysts all linked the smokeless shortages to the cigarette price increase in an effort to make up for lost sales. The normal two cigarette price increases don’t happen until May/June and November/December and now

the trade is wondering if this means there will likely be three increases in 2017, particularly with cigarette volumes slowly declining. As this unfortunate event of supply disruption unfolded, the entire industry was caught off guard and many people seemed surprised that one isolated incident in one factory reverberated so widely and for such a long period of time. But, the manufacturer reacted promptly and swiftly, and communicated clearly to the trade, and it’s difficult to fault the efforts put forth. The common wisdom is that sales weren’t lost at retail, but sales just shifted within the category. Buyers took the opportunity to look at their smokeless sales in more detail and may look at the category in a different way from now on, potentially with a slant on expanding selection. Some store personnel became more familiar with a wider variety of moist snuff, thus encouraging future promotions of different brands. Finally, at many retail sites, a higher comfort level now exists in terms of engaging tobacco consumers. Andrea Myers, former president and current board member of Kocolene Development Corp., is president of Oxer LLC, a retail and wholesale consulting company based in Seymour, Ind.

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CATEGORYMANAGER’S NOTEBOOK

Working With Roll Your Own

Depending on the local marketplace, RYO products are popular offerings for some convenience retailers. By Jeffrey Steele, Contributing Editor

OME C-STORES’ ROLL-YOUR-OWN TOBACCO (RYO)

sales are significant enough to justify a large display at or near the counter. For others, customer demand is barely sufficient to rationalize small display facings, if that. Still, other retailers such as at Truesdale, Mo.-based Warrenton Oil Co. lack enough customer interest to justify committing display space to RYO. “We have talked about it,” said Mark Unnerstall, merchandising manager for Warrenton Oil, which operates 35 FastLane Convenience Stores. “Due to the low cigarette state tax in Missouri roll your own is not big in any convenience stores in our area. Most of our competitors do not carry the product.” It was only a few years ago that the RYO segment was generating a sizable buzz. “There was a tax loophole for pipe tobacco, which created an underground market that allowed cigarette tobacco to be sold as pipe tobacco in bulk,” said Lyle Beckwith, senior vice president, government relations, for the National Association of Convenience Stores (NACS). “You had to buy a very expensive machine to make the cigarettes. Anyone could do it, and it was disrupting the cigarette market,” Beckwith said. “It wasn’t sustainable because there was a huge amount of tax loss. It was inevitable that the government would stop that loss. Retailers were put in a bind, [asking] ‘Do we fight them or join them?’ ” NACS stepped in and worked alongside Congress to close the loophole, Beckwith said. 48 Convenience Store Decisions

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“Our board of directors said if we don’t stop this, we will have to get into this. And this is a business we don’t want to join. . . NACS is not against people rolling their own cigarettes, but having a machine at retail making them in bulk was problematic,” Beckwith said. SELECT CLIENTELE Among today’s convenience stores experiencing greater success with roll-your-own tobacco products is Team Oil Travel Center in Spring Valley, Wis., tucked away in the western part of the Badger State. It’s hard to say if recent robust sales have had more to do with demand or the fact Team Oil’s competitor stopped carrying the product. “Because we don’t have to display it behind the counter, we recently created a six-foot tall display adjacent to the counter, so that consumers can buy their big bag of tobacco and tubes and stuff like that,” said Eric Huppert, company president. “That seems to have increased sales of that product. If you’re standing at the counter you can easily see the display. It’s one of those things I’m not sure deserves the space, because it’s an impulse buy. But putting it there starting at the beginning of the year did increase sales.” The c-store offers three RYO in packages ranging from eight to 32 ounces, as well as the tubes and filters. The different sizes sell about evenly, Huppert said. The customers who buy roll-your-own tobacco tend to have less money to spend, he added, and tend to be older, in their 40s and 50s. Interestingly, buyers appear to be equally divided between men and women. CStoreDecisions ecisions .com

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CATEGORYMANAGER’S NOTEBOOK ROLL-YOUR-OWN TOBACCO SALES IN THE PAST YEAR, a dip in roll-you-own (RYO) tobacco sales has been spurred in part by more local tax initiatives as well as lower fuel prices, which have encouraged U.S. consumers to opt for traditional cigarettes brands, thus impacting RYO sales.

4-Weeks Ending April 16, 2017 12-Weeks Ending April 16, 2017 52-Weeks Ending April 16, 2017

Dollar Sales/ 4 Weeks

Dollar Sales % Change Y Ago

$3.75 Million

-4.76%

-1.12%

Dollar Sales/ 12 Weeks

Dollar Sales % Change Y Ago

$11.39 Million

-3.35%

-1.40%

Dollar Sales/ 52 Weeks

Dollar Sales % Change Y Ago

$51.51 Million

-6.31%

-0.13%

Source: Information Resources Inc. (IRI) Total U.S. Convenience Store All Scan data for the 52 weeks ending April 16, 2017

“All the tobacco we sell is labeled pipe tobacco,” Huppert added. “I don’t know if anyone sells product labeled cigarette tobacco. And that may be in accordance with regulations.” FILLING A NICHE Think about top markets for roll-your-own tobacco, and it’s not likely a college town with an upwardly mobile demographic will be top of mind. It’s not a surprise Zarco USA, which operates four c-stores in Lawrence, Kan., doesn’t do a land-office business in RYO. “We don’t have much of a market for it in our university town,” said Zarco USA CEO Scott Zaremba. “We carry two varieties of loose leaf and we are heavily into packaged and little cigars. That’s what sells for us.” That’s not to say Zaremba isn’t intrigued to fill more of a RYO niche. “We looked into it a couple of times because with the price of packaged cigarettes continuing to increase over the years, we thought customers might be interested in buying roll-your-own tobacco for much less than they were paying for the packaged product,” said Zaremba. Zarco also looked at rolling machines to better help sell the concept. “We looked at the self-rolling machines and we looked at the automated system to produce our own when those were getting popular,” said Zaremba. “The customer could buy the tobacco here and have the machine and roll it themselves. There were some legal challenges as well. And there just never appeared to be a market for the product.” Zarco USA stores carry the packages and the accompanying tubes both at counter and on a rack behind the counter. Patrons tend to be those who began smoking at younger ages when the habit was less costly, and now seek an inexpensive alternative to the increasingly costly packs. Asked 50 Convenience Store Decisions

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to characterize buyer age, Zaremba replied simply: “50.” At Zarco USA, RYO appears to be in a holding pattern. It’s not growing, but not going away any time soon, either. “I don’t think we’ll eliminate it in my lifetime,” Zaremba said. “But if there is something new that comes into the marketplace to propel it forward, we’ll take a look at it. Something like the rolling machines that were so interesting a few years ago, and that we thought might provide some traction for sales, but ultimately didn’t.” Through the country, RYO has become a bit of an afterthought in the years since then-President Obama’s signing of the 2012 transportation bill that tacked on provisions ensuring roll-your-own buyers would have to pay the same taxes and face the same regulatory rules that buyers of packs and cartons of big-name cigarettes would face. Until then, buyers who purchased roll-your-own cigarettes were literally paying a fraction of packaged cigarette cost. “Back when there was that tax loophole to take advantage of several years ago, there was a big spurt in that category,” said Emily LeRoy, executive director for the Tennessee Fuel & Convenience Store Association. “After that, the tax loophole was closed, and it returned to being a fairly obscure item in convenience stores here.” At the federal level, there’s now a wait-and-see attitude with the arrival of President Trump and his new administration. The president’s recent budget proposals outlined broad cuts to several agencies such as the U.S. Environmental Protection Agency. However, plans for the U.S. Food and Drug Administration (FDA) haven’t been communicated. “With the new director of the Food and Drug Administration, which oversees the Center for Tobacco Products, it remains to be seen if there will be a new direction the agency will take regarding its approach to tobacco products,” Beckwith said. CSD CStoreDecisions ecisions .com

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CATEGORYMANAGER’S NOTEBOOK

Cigars Reflect Healthy Profits

With more products to choose from, c-store consumers are keeping cigars at the forefront of the OTP category. By Howard Riell, Associate Editor

HE CIGAR SEGMENT IS a healthy one, but one that she added. “In New England, we’re a natural-leaf cigar marrequires more than a passing familiarity with both reg- ket, so things that appeal to consumers in Massachusetts and New England would be different than, say, the South ular offerings and evolving regulations. Cigars make up 27.9% of the Other Tobacco and the Midwest. (Operators) really need to know their Products (OTP) category in c-stores, according to the markets.” Another question that can only be answered locally National Association of Convenience Stores (NACS) State of the Industry report. Moreover, cigar sales rose 7.2% in involves marketing premium cigars. “I think that depends 2016 and unit sales were up 11.6%. For the 52-week period on where you are located,” Bettencourt said. “We have ending March 19, 2017, cigar sales in convenience stores stores in which we do carry premium cigars because they rose by a healthy 9.85%, to nearly $2.9 billion, according to do sell, but we don’t do that everywhere because we don’t have the market for it. It goes back to knowing your market.” Information Resources Inc. (IRI). The same can be said for pricing, which she termed a “Cigar smokers are brand loyal, which means you have to really know what your customers want,” said Steven complicated question in her state. “In Massachusetts, a sinMontgomery, president of b2b Solutions LLC in Lake Forest, gle that I would normally sell for $1.50, I have to sell for Ill. “The best source for that information is your primary $2.50. In the stores we can, we’ll sell the two for 99 cents, distributor. They will know what is selling in the market but we can’t do that everywhere. The two-packs that would and just as, if not more, importantly, what is selling in the normally sell for $1.99, I have to sell for $5 in certain towns. The premium cigars are $8-$12.” area surrounding each store.” With that information, the retailers should rationalize their selection to ensure that they can properly display SPOILING CONSUMERS Sam Odeh, founder and CEO of Power Buying Dealers the brands that will sell. “In many cases, the cigar and OTP sets are not neatly organized, and this makes it harder for (PBD) USA Inc., of greater Chicago, which includes 25 the customers to see the brands they prefer,” Montgomery owned and franchised locations in Illinois, Georgia and noted. Retailers should develop and maintain a planogram Florida, said convenience stores are suffering from too many for cigars, the same as they do for other categories in the store. brands, styles and flavors. “All manufacturers are racing to Anna Bettencourt, category specialist for VERC the bottom. We retailers have fallen into this huge hole, with Enterprises in Duxbury, Mass., which operates 26 conve- no way out.” As for the legislative front, Odeh was similarly less than nience stores, said that determining what is selling in the cigar space is not simple. “That’s because we are heavily optimistic. “Just when you thought it can’t get worse, yes, legislated by different towns, so we don’t have consistency it can. The government will find (new ways to collect) taxthroughout the state. But it’s primarily cigarillos and foil ation money.” Part of PBD’s solution is to roll out premium cigars, to be merchandised on a newly-added counter packs.” Having an accurate local profile of consumers is critical, display. 52 Convenience Store Decisions

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CATEGORYMANAGER’S NOTEBOOK CHANGES IN CIGAR PACKAGING FROM 2008–2015

EXPERTS SAY SMALL PACK sizes have contributed to the affordability of cigars, especially cigarillos and little cigars. The information in the following chart shows how varied cigar packaging has influenced sales volume (in millions) in the c-store channel between 2008 and 2015.

2008

2015

Packaging Style

$ Volume

Market Share

$ Volume

Market Share

% Change Total Sales

Single Stick

$605.40

33.00%

$577.20

25.60%

−4.6%

Two or three Pack

$12.60

0.70%

$914.10

40.50%

7127.90%

Five Pack

$782.70

42.60%

$500.60

22.20%

−36.0%

20 Pack (Little Cigars)

$154.40

8.40%

$154.50

6.90%

0.10%

Other

$280.60

15.30%

$108.20

4.80%

−61.4%

Source: Nielsen Convenience Track:“Changes in the Mass-Merchandise Cigar Market since the Tobacco Control Act;” Tobacco Regulatory Science, 2017 April

Heidi Rembecki, director of merchandising for Tonawanda, N.Y.-based NOCO Energy Corp., which operates the NOCO Express convenience chain, confirmed that manufacturers continue to transition to pre-priced two- and three-packs. “Consumers look for the two-for-99-cents prepriced packages in our area. They are always looking for a new or seasonal flavor. Depending on store location the three- or four-for-$1 packages are growing in popularity.” Rembecki sees strength in an expanding product line, while holding steady with the proven favorites. “C-stores should keep their planograms up to date with the changing flavors and varieties,” she said. “They need to keep the focus on the old stand-bys, as well.” James Calabrese, a director with the Stores Consulting Group in Wilmington, Ohio, also recommended that c-store go away from simply stocking the lowest-price products. “Carry some inexpensive hand-made cigars, such as Omar Ortez for $3 a stick or Edge for $4, as opposed to only machine-made like Phillies, White Owl, etc.,” said Calabrese. “The serious cigar smoking community is not interested in machine-made cigars and flavored cigars. Convenience stores could capitalize on this by carrying the right SKUs and appealing not only to the White Owl and Phillies cigar smoker, but also to the average-income individual who appreciates a well-made, hand-made cigar.” Calabrese suggested prominently displaying the cigars near the registers but not behind the counter. He has achieved good results with five-shelf units that carry 80% hand-made and 20% machine-made cigars. “It was very successful in turning over the right items. I also took a physical inventory weekly to ensure that my cigar shrink number was under control.” Calabrese also recommended promoting one or two 54 Convenience Store Decisions l June 2017

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items each week. “The c-store can also get these deals from the big cigar suppliers, offer the discount to the consumer, and still make their desired margin.” REGULATION IN PLAY When the U.S. Food and Drug Administration (FDA)’s tobacco deeming regulations went into effect on Aug. 8, 2016 to regulate cigars, pipe tobacco, e-cigarettes and vapor products, hookah tobacco and nicotine gels, the agency established deadlines for manufacturers, importers, distributors and retailers to comply with various regulations. However, according to the National Association of Tobacco Outlets (NATO), as a result of lawsuits seeking to overturn some or all of the deeming regulations, and due to negotiations between lawsuit plaintiffs including the International Premium Cigar and Pipe Retailers Association, the Cigar Association of America and the Cigar Rights of America, the FDA announced in the first week of May that it will defer the enforcement of all future regulation compliance deadlines for cigars, as well as pipe tobacco, e-cigarettes and vapor products, hookah tobacco and nicotine gels for a period of three months. Maintaining sales in so tightly controlled an atmosphere calls for a deft touch, Bettencourt said. “It’s tricky because we range from pricing restrictions to flavor restrictions, and your bordering towns may not. So, you just go with the rules and roll with the punches,” Bettencourt said. Bettencourt said she hopes that her state’s legislative patchwork does not turn out to be the nationwide paradigm going forward. “I would like to think not because it’s ridiculous to me to set restrictions on a legal product, other than the age restrictions. Unfortunately, it probably is.” CSD CStoreDecisions ecisions .com

5/23/17 2:54 PM

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CATEGORYMANAGER’S NOTEBOOK

Accessories Stay Afloat As tobacco products evolve, sellers of tobacco accessories must foster new market opportunities. By Erin Rigik Del Conte, Senior Editor

Mad Max doesn’t make a practice of upselling its S TOBACCO PRODUCTS FEEL a squeeze from regulations, accessories must adapt to thrive. Tobacco accessories. “Manufacturers are making a two-for deal (on tobacco accessories include lighters, rolling papers, e-cigarette cartridges and other purchases that com- products) the norm versus the occasion. I think because the market is getting smaller and the prices are increasing—like plement tobacco use. Smoking accessories totaled $254 million for the 52 weeks anything else, this is a factor,” Magestro said. “Wraps have ending April 16, 2017, and up 1.7% last year, according to really increased over the last several years, but they are so Information Resources Inc. (IRI) Convenience All Scan data cheap to buy that it does not help the category drive dollars.” “I see it being a category that will continue to shrink as for the period. Unit sales totaled 147 Million up 0.40%. The National Association of Convenience Stores (NACS) time goes by,” said Magestro. He predicted inner-city stores State of the Industry (SOI) Summit looked at rolling papers will sell cheap wraps and other accessories, while the subspecifically, and found that papers had 2.2% share of the urbs will see this segment “get smaller and smaller.” Empire Petroleum Partners, with 1,600 retail partners in tobacco category, but were down 3.2% in dollar sales and saw a 4.6% decline in unit sales in 2016. Papers had a gross 32 states, sells lighters, rolling papers and e-cig cartridges among its tobacco accessories, with Bic lighters and cheap margin of 37.2%. lighters being the most popular accessories with customers. SHRINKING SEGMENT In the tobacco category overall, prices are continuing UPSELLING SUCCESS Kip Fruge, senior director of operations and merchanto rise, said Steve Magestro, president of Saukville, Wis.based Mad Max Convenience Stores with 12 locations in dise programs, Dallas-based Empire Petroleum Partners Wisconsin. “We are trying to run as many promotional LLC, said state and local mandates to make age 21 the legal prices on key (tobacco) items as we can to try and help drive age for tobacco use will bring a further dip in cigarette sales. “I would expect accessories would follow suit,” Fruge the sales. More and more promotions seem to be a two-for deal of some sort and more promotions seem to be coming said. Empire Petroleum has been working to incorporate electronic cigarettes, and with that provide cartridges as out, usually driven by the manufacturer.” When it comes to accessories, Mad Max Convenience part of its accessories options. In order to drive sales in the segment, Empire Petroleum Stores sells lighters, rolling papers and wraps (paper tubes). “The accessories category does seem to be shrinking along motivates its customers to upsell accessories with a tobacco with the total dollars sales for the tobacco category,” said purchase with monthly sales contests. “We’ve done a couple sales contests this year for our assoMagestro, who has seen the segment decline over the past five years. “The category has really changed in our locations. ciates tied to upselling lighters. The easiest thing to do is ask customers if they want a lighter,” said Fruge. “The second Not for the better either.” Magestro sees consolidation overall in the category. For thing is to make sure associates know how each lighter is example, he remembers having large selections of cigars priced. No. 3 is to offer a discount on multiple lighters, so and humidors, but he noted humidors are long gone. “We you can sell two with one sale.” Despite efforts to upsell, Fruge expects the category to be have really nice displays in our locations, but so many of the items I remember from years ago, just do not sell anymore.” flat, given the pressures on the segment; however, he noted Five years from now, Magestro predicted, the accessories his stores have a tendency to buck trends. “We’re actually category will see an evolution toward new items and/or slightly above prior year in cigarette sales.” Time will tell if tobacco accessories follow. CSD brands that will keep costs low to entice customers.

Category

Dollar Sales

Dollar Sales % Chg YAgo

Unit Sales

Unit Sales % Chg YAgo

Avg Price Per Unit

Smoking Accessories

$254 Million

1.70%

147 Million

0.40%

$1.72

Avg Price Per Unit Chg YAgo $0.02

Source: Information Resources Inc. Total Convenience Store AllScan data for the 52 Weeks Ending April 16, 2017

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CATEGORYMANAGER’S COLUMN

New York Retailers Under Siege NYACS, retailers, distributors and manufacturers are working together to neutralize local tobacco regulations that impede retailers in doing business. By Jim Calvin

ITH MOUNTING INTENSITY, LOCALIZED attacks on come. Getting retailers engaged—educating policy-makers, the tobacco category are spreading like wildfire appearing at public hearings, speaking with customers— across New York. is critical to defending our right to continue selling legal In the past six months alone, three more tobacco products to adult customers in a socially responupstate counties and two large Long Island towns have sible manner. jumped on the Tobacco 21 bandwagon. In the process, some Typically, we’re outnumbered, the political headwinds of them enacted a ban on new tobacco outlets near schools are strong, and few elected officials have the courage to say or playgrounds and/or a redundant local licensing require- no to something that sounds on the surface to be rational ment for stores selling tobacco. despite facts to the contrary. But nobody’s going to stand up Meanwhile, it’s a general-alarm blaze in New York City, for you if you don’t stand up for yourself. where the city council is now considering a suite of legislation Since their cause is noble, the anti-tobacco activists that is ostensibly aimed at “Big Tobacco,” but instead whacks pushing these local restrictions think nothing of trampling the little guy—family-run bodegas and convenience stores— the rights of retailers. Case in point: We discovered that for having the audacity to have tobacco products on our in Albany County, which implemented a local Tobacco shelves along with the milk, bread, coffee, lottery, food, bever- 21 law last year, stores caught selling tobacco are not only ages and other products we carry for neighborhood residents. being fined by the county for violating the New York State They would raise the minimum price our stores must Adolescent Tobacco Use Prevention Act as in the past, but charge for cigarettes from $10.50 a pack to $13, establish fined an additional sum for violating the new county law by minimum prices for other tobacco products (OTP), raise selling to someone under 21. the biennial tobacco dealer license fee from $110 to $340, You see, the 17-year-old undercover purchaser they use is and force you to get a separate license to sell e-cigarettes less than 18—and under 21. This is equivalent to a cop issuat another $340. Pray tell, how much do the illegal street ing you one speeding ticket for violating state traffic law and peddlers who control over half of the Big Apple’s cigarette another for a violating county traffic law—for the same offense. marketplace pay in license fees? It’s double-dipping. It’s unethical, if not downright illegal. Even worse, another of the bills would arbitrarily cut the number of licensed tobacco outlets in the city by attri- ULSTER BUSTER tion. Anyone buying an existing licensed shop would be Amid all these assaults on the category, a single daisy has automatically disqualified from getting a tobacco license— popped up through the rubble that is New York’s tobacco torpedoing the value of retail businesses that families have regulatory environment. A law has been proposed in Ulster spent their lives building. Of course, bootleggers who sell County that would actually outlaw possession of tobacco by 10 times as many cigarettes as a licensed store without both- minors—a policy long advocated by NYACS as a far more ering to get a license would be wholly unaffected. targeted and effective way to get teens to stop smoking. A The impetus for all this? Mayor deBlasio’s political need public hearing is scheduled June 20. to respond to an article in the New York Times saying he’s The sponsor argues, correctly, that “merely prohibiting been softer on tobacco control than his predecessor Mike the sale of tobacco products to minors is not sufficient to Bloomberg. discourage or prevent the use thereof.” And he points out that New York is one of only five states without a possession ENGAGEMENT IS CRITICAL law. Who knows? Maybe this local initiative will spread like The New York Association of Convenience Stores wildfire too. (NYACS) has partnered with retailers, distributors and manufacturers to identify and respond to these localized Jim Calvin is the president of the New York Association threats as they arise. But they’re so ubiquitous it’s hard to of Convenience Stores (NYACS), a private, not-for-profit trade association dedicated to unifying, serving and reprecatch them all at an early enough stage to affect the out- senting the convenience store industry of New York State. CStoreDecisions ecisions .com

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FOODSERVICE

Marketing Meaty Meals When it comes to delivering product versatility, portability and good taste, you can’t beat fresh chicken and a well-kept roller grill. Retailers and other experts reveal how these two foodservice programs enable them to satisfy customer cravings from the morning until night. By Marilyn Odesser-Torpey, Associate Editor

HE OLD ADAGE GOES that people eat with their eyes and widespread appealing foodservice products a c-store first, but that’s only half the story. They also consume can offer, Caldarola said. She pointed out that chicken can be a strong seller all day with their noses, which is why the aroma of cooking beginning with breakfast. chicken is a strong selling point for retailers. “Look at any Chik-fil-A in the morning and you’ll see In fact, the mouthwatering smell of frying chicken wafting through the store and even out to the forecourt is usually lines wrapped around the block for their chicken biscuits,” the first experience customers have with your foodservice said Caldarola. Chicken is also a great choice for c-stores because of the offering, explained Dr. Nancy Caldarola, general manager of the Food Training Group, a hospitality industry consult- incremental sales of side dishes such as corn on the cob, mashed potatoes and gravy, green beans and, of course, ing firm based in Roswell, Ga. “Chicken is one of the most attractive hand-held foods for just-baked biscuits, she noted. In addition to wanting a meal or snack, a growing numpeople,” Caldarola said. “It is also the ultimate all-American ber of consumers are becoming concerned about how the comfort food.” The research firm Packaged Facts recently reported that chickens are raised, Caldarola noted. KFC announced in sales of poultry are expected to increase over the next five April that it will stop serving chickens raised on antibiotyears, with one contributing factor being the cost advan- ics in all of its U.S. locations by the end of 2018. Other major tages over many other types of meat. Consumers are also fast feeders such as Wendy’s, Subway, Taco Bell, Chick-fil-A influenced by health authorities, such as the American and McDonald’s have already stopped using them or have Heart Association, which encourage consumption of poul- pledged to stop using them in the future. try as an alternative to red meat. With so many different forms, from bone-in pieces to fin- IMPROVING POULTRY Carl Hitt, Jr., director of retail operations for Wi-Not gers, strips, tenders, livers and gizzards, as well as its ability to be prepared in so many different ways and take on so Stop retail stores with 12 stores in northern Virginia, five many flavor profiles, chicken is one of the most versatile of which have full delis that sell chicken, said featuring 58 Convenience Store Decisions

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FOODSERVICE poultry that’s fresh—never frozen—sourced locally and breaded on site provides the company’s program a big advantage. Hitt also agreed with Caldarola that fried bone-in chicken says home cooking to many consumers. “Not too many people are making bone-in fried chicken at home anymore, so they’re looking for that flavor from us,” said Hitt. At Wi-Not Stop stores, chicken accounts for a big—and growing—part of overall foodservice sales. In addition to selling chicken throughout the day, the chain sells a lot of family-size dinners as well as volume orders from churches and other organizations totaling some 400 pieces. Best sellers for the stores are bone-in breasts and wings. About 75% of Wi-Not Stop customers who purchase chicken also buy sides to go with it, Hitt said. Customers at Harrison, Ark.-based White Oak Station convenience stores like choosing their own pieces of chicken and sides from the hot service line. Three of the chain’s 28 locations in Texas, Arkansas and Missouri offer Krispy Krunchy chicken and 10 others White Oak’s own signature brand fried chicken. “When they can see and smell the chicken on the line they know that it’s fresh,” said Chief Operating Officer Rodney Thomas. “Competition in the food business is more than just your next convenience store, so doing things right and being fresh are the only options to foodservice longevity.” Some of the White Oak stores also offer rotisserie-cooked chicken. “We want to give our customers alternatives and several of our locations do very well with the rotisserie chicken,” Thomas explained. “But fried chicken is still the No. 1 favorite with our customers.” Chicken strips are the best sellers throughout the day, followed by bone-in breasts and wings. At dinner time, many customers choose White Oak’s “meal deal” consisting of chicken, potato wedges and biscuit. They can also build their own customized meals by choosing from a number of other sides. For a lighter meal or snack any time of day or evening, the roller grill can provide a wide variety of items at inexpensive prices. As always, it is the perfect home base for hot dogs, but, in recent years, food producers and retailers have begun to recognize the greater potential of this cooking and merchandising workhorse, creating items that span meal and snack occasions, flavor profiles and even cultures.

4 TIPS TO DIGEST

• Chicken and roller grill items satisfy day and night. • Pleasant product aromas that waft throughout the store help create sales. • Consumers want more variety with their offerings. • Value deals always appeal.

tornados and roller bites, said Paul Servais, retail food service director of the chain, which operates 515 stores in Wisconsin, Minnesota and Iowa. “Roller grill items are usually the most portable and easiest to eat on the go and in the car,” he noted. There’s never a dull day on the grill where customers might find such exotic delicacies as pork chile verde or Korean beef barbecue tornados, sriracha jack or gouda chicken smoked sausage, Guinness beer brats or pork and vegetable egg rolls. Limited time only (LTO) items move in and out quickly, rotating one meat and one snack item every four weeks, creating consumer excitement. “Guests like how we feature hot, spicy, off-the-wall and trendy items as LTOs,” said Servais. In a recent Mintel survey of customers aged 18 or older who have purchased a roller grill item from a c-store in the past three months, 35% of the respondents said that they would like to see Latin roller grill items such as chorizo and quesadillas. Thirty-four percent said they would like to see Asian items such as egg rolls. The grills at Kwik Trip begin cooking first thing in the ROLLER GRILL SALES At LaCrosse, Wis.-based Kwik Trip, one roller grill per morning with an assortment of sausage, egg and cheese or store is not enough to hold the 12 or so different items French toast and sausage tornados; breakfast sausage links that are featured each day from a total selection of about and pork, egg and cheese roller bites. “While the majority of our morning business is in break30. Each store has two grills—one for meat products such as hot dogs ( including 10:1 and 4:1 Angus beef), cheddar- fast sandwiches, the roller grill just offers another option to wurst and brats, the other for snack items such as egg rolls, our customers,” Servais said. 60 Convenience Store Decisions

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FOODSERVICE Forty-three percent of Mintel survey respondents said they were interested in breakfast roller grill items. Forty-two percent said they would like to see a variety of condiments/ dipping sauces and 35% said a variety of fresh toppings. According to Servais, Kwik Trip has a “huge” condiment bar with fresh toppings including tomato, lettuce, onion, relish, sauerkraut and pickles. Value-minded consumers also look to the roller grill for good deals. At Kwik Trip, tornados, eggs rolls and roller bits are sold at two-for prices. Every weekend, hot dogs, which usually sell for $1.79, are offered at $1.29. And the c-store often bundles the 10:1 hot dog with a drink. HOT IN ATLANTA At Atlanta-based RaceTrac Petroleum convenience stores, the roller grill remains an important foodservice program, “yet still presents us with opportunities for future growth,” said Michael Elliott, category manager of hot foods for the chain, with 445 stores in Georgia, Florida, Louisiana and Texas. “We truly believe this offer to be a ‘destination driver’ for guests to visit our stores,” he explained. “We have seen year-over-year growth in this category for the past five years, and still forecast further growth in the coming years,” he explained. At RaceTrac, roller grill sales are impressive 24 hours a day, 365 days a year. Mornings are particularly busy as guests just off the night shift are looking for “dinner” at 6 a.m. and others purchase items from the grill to reheat for lunch later in the day. For guests looking for traditional breakfast foods, the stores carry Jimmy Dean breakfast sausage links as well as “an authentic pork tamale” that is a popular early day item. There are also revolving LTOs. “While many of these breakfast flavors sell well in the

Because of their portability and the fact that convenience retailers are investing in larger selections, roller grill offerings continue to be an important part of foodservice programs. Retailers like Atlanta-based RaceTrac offer expansive roller grill programs.

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“CHICKEN IS ONE OF THE MOST ATTRACTIVE HAND-HELD FOODS FOR PEOPLE. IT IS ALSO THE ULTIMATE ALL-AMERICAN COMFORT FOOD.” -DR. NANCY CALDAROLA, GENERAL MANAGER OF THE FOOD TRAINING GROUP.

morning, we still see strong sales on these items throughout the day as well,” Elliott said. Although RaceTrac tends to see spikes in sales around the breakfast and lunch dayparts, the other “in between” times—which the company considers “snack occasions”— also show a steady stream of sales,” said Elliott. Each of the RaceTrac stores has three to six roller grills displaying anywhere from five to 12 unique flavors of items. Throughout the day, the best selling item is the Nathan’s Famous 100% All Beef Hot Dog. Other hot items are taquitos, roller bites and tamales, traditional corn husk-wrapped and stuffed with seasoned pork, that are unique to RaceTrac, Elliott noted. LTOs are rotated into the roller grill mix on a quarterly basis. There is a permanent LTO spot on the grill so these items don’t replace an everyday item. “We have guests who eat from the roller grill every day, so offering new products is important to them,” he said. “Our approach to LTOs is to feature something a little different that might not make it as an everyday item, but certainly drives excitement and trial on the grill.” To allow guests to customize their items, in all of RaceTrac’s new and remodeled stores, there is an expanded Taste Works toppings bar, which includes anywhere from eight to 12 toppings delivered to the stores on a daily basis. Among the selections are fresh diced tomatoes, onions, lettuce, jalapeños, dill pickle chips, banana peppers, coleslaw, pico de gallo and sour cream. On the value side, the stores sell their roller grill items at an “everyday low price” of $1.69 or two for $2.50. Bundles are also introduced sporadically to keep things interesting for guests and encourage them to try new things, Elliott said. Based on its survey results, Mintel suggested that convenience store retailers be on the look out for roller grill items that consumers may perceive as “clean” and more healthful. Fifty-seven percent of survey respondents said “convenience foods have too many artificial ingredients,” 34% said they prefer no artificial ingredients and 36% said they would like to see items with no preservatives, creating a new opportunity for c-stores. CSD CStoreDecisions ecisions .com

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FOODSERVICE

Pizza: Baking Bold, Authentic Offerings

Pepperoni and sausage may still reign supreme as pizza toppings, but some c-store retailers are using on-trend bolder, authentic flavors and customized combinations to pique consumer interest in their pies. By Marilyn Odesser-Torpey, Associate Editor

to the permanent menu, said Greg on the wallet, pizza is a natural Tornberg, the company’s vice presifoodservice fit for convenience dent of food service. Pump-N-Pantry stores also counts stores and their customers. According to a March report on c-store its own specialty chicken, bacon and foodservice from Mintel research, 52% ranch pizza as a top seller, noted Wade Robinson, food service supervisor/ offer some pizza offering. In a research report on the U.S. pizza digital marketing manager for the market published in February 2016, Montrose, Pa.-based chain. Other poultry-centric specialty pizPackaged Facts confirmed the dominance of pepperoni and sausage over zas at Pump-N-Pantry include one other toppings across all restaurant topped with chicken, Buffalo wing sauce, segments, with these premier proteins blue cheese and ranch, and another appearing on 73% of all menus. But, called chicken spiedie that features marthe report said, other toppings such as inated and grilled chicken strips. The chicken spiedie is an authentic regional chicken and bacon do well. At West Des Moines, Iowa-based favorite in stores located in the northKum & Go convenience stores, for ern Pennsylvania stores just across the example, a limited-time-offer (LTO) border from Endicott, N.Y., where the combination of chicken and bacon popular preparation originated. “At some of our stores the chicken with a kick of chipotle and a base of creamy ranch dressing created such spiedie pizza outsells pepperoni,” a demand that the pie was promoted Robinson said. ASTY, TRANSPORTABLE AND EASY

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He also explained that “anything with bacon” sells extremely well. LTOS INCREASE INTEREST The Mintel report suggested that pizzas topped with egg, meat and cheese combinations “can be a unique offering that may increase breakfast visitation.” Both Pump-N-Pantry and Kum & Go (which also brings hashbrown potatoes to the toppings party) have achieved substantial success with their breakfast pizzas. “Breakfast is a big pizza daypart for us,” said Kum & Go’s Tornberg. “We sell most of it by the slice because it fits nicely for customers who are coming in for coffee and other drinks in the morning.” Pump-N-Pantry has been offering breakfast pizza for at least 18 years, Robinson pointed out. It is available all day both whole and by the slice. CStoreDecisions ecisions .com

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FOODSERVICE “PIZZA IS LABOR INTENSIVE SO YOU HAVE TO BE DEDICATED TO DOING IT AND TO BE TRAINING NON-STOP.” - WADE ROBINSON, FOOD SERVICE SUPERVISOR/DIGITAL MARKETING MANAGER, PUMP-N-PANTRY

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“Some of our customers buy breakfast pizza for dinner,” he said. “Our Pike’s Creek store sells at least six whole breakfast pies every Tuesday evening.” Thinking way outside the box can also shine a light on a pizza program. Kum & Go runs an innovative LTO (a recent one was a taco pizza) every three to four months. Along with the standard pepperoni and sausage, which are available every day, slices of the LTO pizza rotate daily with other specialty pizzas for sale by the slice. During Lent for the past three years, Pump-N-Pantry has offered a pizza topped with pierogies, onions, cheese and garlic butter. The idea came from the stores’ pierogi supplier. “Before Lent, customers ask us when we’ll be bringing back the pierogi pie,” Robinson said. Mintel emphasized that “possibly the most important development in the pizza restaurant landscape is the growth of fast casual pizza chains (that) specialize in fresh build your own personalized pizzas. In addition to an assortment of proteins, retailers could offer a variety of cheese and vegetables as potential toppers. Packaged Facts stated although mozzarella is the most common type of cheese used, with 71% penetration on restaurant menus, trends suggest a growth in other varieties such as ricotta, parmesan, goat, gorgonzola and fontina. “Utilizing more interesting cheeses is one way to denote premium positioning as well as to help differentiate menu items from traditional pizza variants,” the Packaged Facts report stated. To ramp up the flavor without amping up the calorie count, retailers can use herbs such as basil, which has increased in use by 20% since 2010. CStoreDecisions ecisions .com

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FOODSERVICE

utes to bake the 13-inch pizza in one of three different kinds of ovens—a Lincoln impinger, Turbo Chef conveyor or Ovention. To consistently promote the pizza, the stores sample the product several times a week. On Fridays, patrons can buy one large pizza and get one free. PROMOTIONS ENTICE Pump-N-Pantry, which has also Pizza is a “foundational offering” in Kum & Go’s foodservice program. It is featured its current pizza program available in over 300 of the company’s for about 20 years, continues to see total 415 locations spanning the states growth in the category. “We’re known in our market of Iowa, Nebraska, South Dakota, Minnesota, North Dakota, Montana, areas as the community pizza shop,” Wyoming, Colorado, Oklahoma, Robinson said. The 16-inch pies are made from fresh, Arkansas and Missouri. Even after 20 years, the pizza cat- hand-pressed dough that is proofed in egory has continued to grow for the the stores and a half pound of cheeses. Seven of the stores have touchscreen chain, said Tornberg. The dough is made in a commissary kiosks where customers can easily to the company’s specs and proofed in choose from over a dozen toppings. The pizzas are baked in stone hearth the stores every day. It takes six minOther increasingly popular herbs include cilantro and oregano. “These ingredients have a strong alignment with authentic Italian flavors and communicate ‘fresh,’” Packaged Facts said.

ovens, which are in all but two of the 15 stores located throughout six northeastern Pennsylvania counties. Pizza, Robinson said, accounts for between 50-65% of total foodservice sales for the stores. An ongoing promotion is the Tuesday “2-Fer,” buy one large pizza and get one free. “Our phones blow up on those days,” Robinson said. Another strong promotion is a combo meal consisting of a pizza slice and 20-ounce bottled soda. “Pizza is labor intensive so you have to be dedicated to doing it and to be training non-stop,” Robinson said. “Our customers expect our pizzas to look and taste the same no matter which of our stores they go to, so we use strict recipes and expect our sales associates to follow them.” CSD

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TECHNOLOGY

Accountability Is Key to Loss Prevention Convenience stores with high standards succeed at reducing shrinkage and cash loss. By Erin Rigik Del Conte, Senior Editor

OSS PREVENTION AND INVENTORY CONTROL at convenience stores begin at the top, with clear rules and best practices for employees and store management, followed by accountability for missteps. Convenience Store Decisions caught up with loss prevention expert Chris McGoey, ‘the Crime Doctor’ and founder of McGoey Security Consulting for some tips on improving loss prevention strategies.

Convenience Store Decisions (CSD): You’ve said that clean, orga-

poor training because the new-hire is only given a crash-course in procedures taught by a poor trainer. Even a quarterly cycle will make it difficult to expect and achieve inventory, sales and cash accountability. To the contrary, being well organized has many operational benefits. Having good accountability allows a manager to spot even small changes Chris McGoey in product movement, cash overages and shortages or variation in sales trends, and rectify the cause.

nized convenience stores with proper inventory management and accountability have lower shrinkage, theft and cash loss. Why does a well-organized and well-managed store help with loss prevention? Chris McGoey (CM): After four CSD: What are some best practices in decades working with con- “IF EMPLOYEES KNOW THAT THEY inventory management/control you venience store chains about can recommend to c-stores to help ARE RESPONSIBLE FOR inventory shrinkage and cash achieve this goal? ACCURATE INVENTORY AND loss solutions, I’ve found that CM: Well, there are a few: daily accountability is a top pri- SALES TRANSACTIONS, THEY ARE 1. Ideally, there should be a model ority for loss control. in place when acquiring a c-store franMORE LIKELY FOLLOW YOUR The best c-store opera- PROCEDURES TO STAY IN GOOD chise where all inventory is accounted tors have high standards and for and cash accounting is zeroed out. STANDING OR ADVANCE.” demand good accountabilShort of that, there should be a method ity practices from the moment to reset to a defined default operation inventory enters the store until it’s processed out though to establish a business baseline. sale or transfer transactions. 2. C-store operators need adequate training in all the necI’ve audited thousands of high-shrink, high-cash loss essary systems required to run an efficient operation. Since stores, and I always find a corresponding lack of organiza- many c-store operators don’t have prior retail store experience, tion, attention to detail and clutter. A sloppy, disorganized a structured training manual, in-store training and ongoing store is a sign that management doesn’t have high stan- supervision is necessary to be successful. dards for inventory and cash control and doesn’t require 3. I cannot stress enough how important it is to set systems it from store employees. Dishonest employees see this as in place that help you assess inventory and cash accountability, an opportunity to take advantage of disorganized manage- even if they appear to require that employees take a few extra ment because they know they can blame former employees steps. Those extra steps provide the necessary controls to run or shoplifters for unexplained inventory losses. an efficient business with accuracy and accountability. Disorganized stores usually have higher than normal employee turnover and will need emergency employee CSD: You’ve been known to say good employees want to replacements when one fails to show up to work. The be held accountable. Why is that? response is often a poor hiring decision followed by very CM: I’ve confirmed over many years that good employees 68 Convenience Store Decisions

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TECHNOLOGY prefer structure with clearly defined and articulated procedures for every task throughout a shift. This structure creates a high standard for productivity and accountability for good employees to achieve. If employees know that they are responsible for accurate inventory and sales transactions, they are more likely follow your procedures to stay in good standing or advance. Structure allows c-store operators to compare employee transactions and activity by shift and quickly spot the non-compliant or dishonest employee.

CSD: What are some steps for holding employees accountable? CM: A store with high inventory and cash losses may need to replace staff because systems have broken down and would otherwise take months to sort out those responsible: 1. New management or at least a new training program is needed to instill a commitment to high standards of accountability; 2. The store needs to be meticulously cleaned and inventory reset to establish the model for employees to maintain moving forward;

3. Detailed job descriptions with detailed training are needed for each shift to demonstrate how to accomplish every task and be held accountable; 4. Close supervision is required initially to assure that high standards are understood and the staff capable of adhering to the changes. Some employees will not rise to the challenge; 5. A clean and organized store will generate immediate positive feedback from customers; 6. New accountability for inventory controls and cash management will bring a new efficiency that will make everyone’s job easier; 7. Cash accountability systems will allow honest employees to demonstrate 100% compliance and accuracy and should produce a surprising increase in sales activity per shift (e.g. employees not ringing up sales and pocketing the money is a major cause of cash losses). Stay tuned for more from Chris McGoey, founder of McGoey Security Consulting, in an upcoming issue when he tackles training, hiring and cash handling best practices. Learn more about McGoey’s retail experience at CrimeSchool.com.

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COLUMN TECHNOLOGY

Moving Forward With Payment Technology As EMV implementation wraps up, retailers must consider where mobile payment solutions are headed. By Ed Collupy

HE BASEBALL SEASON IS in full swing and I’m reminded cards, mobile payments acceptance, and faster, more conas I continue to think about card payments in the venient check-out for merchants.” Transaction size in convenience retailing ranges from petro/convenience store industry of the quote from the great Yogi Berra: “It ain’t over ‘til it’s over.” And low-value snack purchases to higher-value transactions that yes, it feels like we’re in extra innings, but there are some cigarettes and beer purchases drive. The capability to support selectable kernel configurations are optional PINPad wins as evidence. The focus has been and remains to be about EMV features that support different capabilities for different (EuroPay, MasterCard and Visa) inside the c-store, and the transactions. For example, if allowed by the payment system, a terplanning for exterior implementation, but amidst these compliance-only initiatives other payment projects are tak- minal might allow only ‘No CVM (Cardholder Verification ing hold. Some are centered on the customer experience Method) Required’ for small transactions and support signature/offline PIN for the larger at the point of sale (POS) , othones. Selectable kernel configuers will take EMV through its “CONTACTLESS EMV AND SELECTABLE rations allow PINPads to invoke next steps, and often these two configurations dynamically to meet up with security-related KERNEL ARE ACTIVE INITIATIVES THAT support the required terminal improvements. CONVENIENCE RETAILERS ARE APT TO capabilities on a transaction-byLooking at other retailer projFACE. CONTACTLESS PAYMENTS, WHERE transaction basis. ects as their EMV implementations THE CARD IS NOT DIPPED OR SWIPED, The customer is at the forefront of wrap up can provide a signal that many payment-centric projects that there is more to do. Contactless ARE IN HIGH DEMAND AND PAYMENT are in the news every day. PersonEMV and selectable kernel systems CARD ISSUERS HAVE DISCUSSED AT A to-person payments are expected are active initiatives that conveRECENT FORUM THAT THEY WANT TO to increase beyond the 36% of connience retailers are apt to face. sumers, who, in a recent Bank Contactless payments, where SUPPORT THIS TECHNOLOGY.” of America trend study, reported the card isn’t dipped or swiped, using such a service. Travel-related are in higher demand. Payment payments are amongst the top card issuers discussed at a recent transaction types where this type of transaction is completed. forum that they want to support this technology. ExxonMobil recently announced the latest addition to With foodservice being top of mind for many in the c-store industry, McDonald’s, which was slow to imple- its Speedpass+ mobile app gas station, making payments ment EMV, has been an early adopter of EMV contactless even easier for its customers who drive a Ford vehicle with technology. Likewise, a major U.S. technology retailer will SYNC3 technology or use an Apple Watch. A new survey of 2,000 adults conducted by Morar be moving to a sixth round of EMV certification in 2018, Consulting for Adyen, a global multichannel payment comwith a focus on this capability. Transit authorities across major U.S. cities are only pany offering businesses an outsourced payment solution, starting to plan for EMV, but have a desire to implement found consumer expectations for retail payments in five contactless systems, and many believe this could be the years will be more demanding. Seventy-seven percent expect retailers to offer mobilehomerun-use case to spur levels of mobile payment adoption already found in Canada and Europe. And, the U.S. payment acceptance. In addition, 67% expect to make Payments Forum’s website suggests “now is the time for a wearable-device payments, and more than half of those surfull-throttled push…to debate the merits of dual-interface veyed believe they will be able to pay as they walk out of 70 Convenience Store Decisions

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COLUMN TECHNOLOGY the store and have their credit card automatically charged, as Amazon is now testing. SECURITY FOR TOMORROW All of these advancements, moving payments forward, come along with yet additional security needs to ensure broad and confident customer acceptance. To accomplish this and coming on the heels of EMV, is the development of, by POS software/hardware and other providers, point-to-point encryption (P2PE) and tokenization solutions. Encryption and tokenization are two separate data security approaches and can be implemented independently of each other but will be most effective when implemented together. P2PE occurs at one endpoint (e.g. PINPad) and decrypted at another endpoint (e.g. payment processor) and, in essence, scrambles cardholder data during transaction processing. There are multiple available implementation options of P2PE and each has pros and cons. Depending on how you implement it, this could potentially bring benefits such as PCI scope reduction and greater flexibility for payment card routing options and likewise there could be downsides, including who in the payment cycle could decrypt and be exposed to a possible data breach. Tokenization is a payment industry methodology for the replacement of sensitive data with a non-correlating unique identifier that cannot be derived or otherwise reverse engineered. Also, tokenization provides an additional layer of security while cardholder data is in motion, in use, and at rest. Like P2PE, tokenization can reduce PCI scope and comes with the need to be thoughtful with your implementation methodology. Along with your solution providers assessing the various flavors of data encryption and tokenization based on your business model and strategy makes sense as a next step as you consider new payment programs at your stores and on your mobile app. Here are some questions to consider: • What data does my business require post authorization? • Do I do transaction-based analytics today? • What is my current settlement and reconciliation process? Will this be changing in the near future? Advancing the bases is important to winning a baseball game. For petroleum/convenience retailers, the game is far from over and advancing payments forward in a thoughtful and secure way is important to winning, for your operation and for your customers. Ed Collupy, executive consultant at W. Capra Consulting Group, can be reached at ecollupy@wcapra.com and be sure to visit www. capraplus.com for more retail technology and business insights. CStoreDecisions ecisions .com

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MORE ON MOBILE According to a recent report from Business. com, there are strategic reasons for U.S. businesses to explore the feasibility of a mobile wallet investment. Among them are the following: 1. Mobile Payments Can Save You Money Accepting mobile payments is often cheaper than traditional credit card processing. With the right equipment, it’s possible to avoid those 1-3% swipe fees. 2. Near Field Experience Near field communication (NFC) is quickly emerging as the gold standard of the mobile payment industry. According to Juniper Research, NFC-based sales could go from $60 billion (in 2012) to $110 billion (in 2017). 3. Mobile Payment Demographics Mobile payment adoption is higher among the 35 to 44 age bracket (29%) than among 25 to 34-year-olds (20%). June 2017

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OPERATIONS

Loyalty Bits

The factors that influence loyalty trends seemingly change everyday. So what are the latest? By Erin Rigik Del Conte, Senior Editor

{

LIFESTYLE TRENDS APPEAL TO SINGLES

As lifestyles change and more shoppers remain single longer, Mintel finds brands that embrace this reality are rewarded by customers.“Singles are feeling the pressure to achieve certain milestones in their lives, and likely will be receptive of brands, products and services that allow them to get ahead of the curve. Reassurance and support from sympathetic brands that their reality is something to embrace, not to be discouraged by, will likely go a long way in helping build loyalty. Social media has a stronger ability to elicit emotional responses than advertising through traditional media, but also provides brands the ability to interact and engage with users to create more realistic connections. This indicates that brands must tread carefully in their traditional messaging so as to not leave singles feeling left out.” — Gina Cavato, lifestyles and leisure analyst, Mintel.

What Is Helping Drive Fueling Stops?

13% of customers have used a c-store/gas app in 2017.

10% of customers used a c-store/

16% say the in-store offer is driving their

gas app in 2016.

fueling decision, a five-point increase since 2015.

58% used the GasBuddy app,

which uses crowdsourcing to find the cheapest gas prices in an area.

41% have used c-store/gas retailers’ branded apps.

The most popular app features, in order, 1. Ability to compare fuel prices, 2. Locate gas stations, 3. Manage loyalty programs.

Mob i Appsle Con ti Grownue th

% of American drivers still say “the gas price,” a six-point drop over the past two years. Source: Part of the 2016 NACS Retail Fuels Report. The survey was conducted online by Penn Schoen Berland; 1,114 U.S. adults who purchase fuel for a vehicle such as a car, truck or van at least once per month were surveyed Jan. 4-6, 2017.

KNOW YOUR MEMBERS

Source: Market Force Information, February 2017, study based on 11,000 customers.

What Do C-Store Operators Like About Loyalty Programs?

78% agree they create more store revenues.

51% say they drive higher foot traffic.

60% believe loyalty programs

encourage shoppers to increase store visits and spend more.

Source: Excentus survey of 40 c-store operators, December 2016.

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Source: 2016 Excentus-Ipsos eNation survey of 1,120 U.S. customers conducted Aug. 15-17.

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CStoreDecisions ecisions .com

CStoreDecisions.com is geared toward C-Store retailers, convenience store suppliers, and distributors looking to stay abreast of industry trends, new product offerings and category management best practices.

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OPERATIONS

Designing for Success

Branding accents can help weave a holistic design concept throughout the store. By Erin Rigik Del Conte, Senior Editor

CONVENIENCE STORE’S DESIGN CAN convey an unconscious message to customers about its values, brand and food quality. Today, many convenience store chains are remodeling to feature a modern, upscale look that showcases their brand message from forecourt to the checkout counter. Des Moines, Iowa-based Kum & Go, which operates more than 400 stores in 11 states, introduced a prototype last year and since then has rolled out a total of 27 locations that incorporate this updated design. Its latest location to feature the design opened its doors in Colorado Springs at the beginning of May. While Kum & Go operates 16 locations within the area, it’s the second location in the area to feature the prototype.

“We call the store prototype the ‘Marketplace.’ Every Marketplace has a Go Fresh Market (what Kum & Go calls its fresh food area), and then many of our other stores that don’t use the Marketplace design also have a Go Fresh Market as we focus on food increasingly with our stores,” said Kristie Bell, communications director for Kum & Go. A key feature of the Marketplace is an expanded and open food preparation area. In the Marketplace stores, the food counter for the Go Fresh Market is located in the front and center of the store, so customers see it the moment they enter, and understand that Kum & Go is a destination for fresh food. The Go Fresh Market also shows employees preparing the food. “Associates are making pizzas front and center,” Bell said. “They’re making made-to-order sandwiches in front of the customer after they’ve been ordered. This really helps bust some of those myths around convenience store food that it’s all frozen or prepared somewhere else. In our case, it’s prepared fresh in store and you can see associates doing that.” Bell noted that Kum & Go has seen an uptick in food sales in stores with open kitchens. “When they can see it, then they know it’s fresh.”

A key feature of Kum & Go’s new Marketplace concept is an open food preparation area. Also, the food counter is located in the front and center of the store. The Marketplace prototype features a “rustic, industrial” feel, concrete floors with neutral colors and wood accents. In addition, quartz countertops provide patrons a “luxe” feel. The store also features accents of red—Kum & Go’s signature color. 74 Convenience Store Decisions

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BRAND ACCENTS Beyond food, the Marketplace prototype features a “rustic, industrial” feel, which Bell noted is a popular type of design right now. “We have concrete floors with lots of neutral colors and wood accents. We’re using quartz countertops, which gives it a little more of a CStoreDecisions ecisions .com

5/23/17 9:42 AM

OPERATIONS adding beer caves to its locations at the end of September. Today, nine stores are selling beer and four more are under construction. A number of the stores were new builds with beer caves incorporated into the design from the beginning. Existing locations needed to remain open while adding the cave. “We made sure we didn’t close the stores. The stores did a great job of working around the contractors and at times we had to put temporary counters up,” said Robert Perkins, vice president of marketing for Rutter’s, which has 68 locations in York, Pa. “In some cases we’ve actually busted out the side or the back of the store to add display space and cave space and enhance the seating.” Seating has been a big part of Rutter’s strategy over the last decade because of its focus on foodservice, so while some stores needed additional seating, Perkins noted it wasn’t a “big add” and overall contributed to a better presentation. “Our big strategy is to make sure we have four to six cooler doors of beer, and inside those doors is typically where we would have singles and LITTLE TOUCHES six-packs, and then we have a cave The Marketplace store also features a entrance door.” seating area for 20-30 people with natRutter’s partnered with shelvural accents, such as bamboo-topped ing manufacturer Technibuilt. tables. The outside seating has to withDesign-wise, Rutter’s wanted stand the elements, so the tables there to make the beer cave as bright are made from aluminum, but feature a as possible. It uses LED lightwood-grain feel. Free Wi-Fi and charging inside and on the exterior, ing stations for smartphones or laptops and features LED digital media also add a welcoming touch. for advertising. “We use actually Inside the store, Kum & Go offers either a 542-inch or 550-inch TVs clear aisles and easy to navigate zones. across the front of the caves with “When you walk in our store it’s an messaging about advertising and open space. It gives customers room To highlight its wine selection, Rutter’s internal specials. We use a blue Marley to breath. They can see where they are team created side panels and graphics for the covering on the front doors and going. They can clearly see the kitchen wine section using earth tones to convey a more the exterior of the cave portraying and where the fountain drinks are,” upscale feel. It also uses graphics to tie its wine the cold (29 degrees) atmosphere,” Bell said. offering with its foodservice. Perkins said. Instead of regular perpendicular or Rutter ’s is also adding wine parallel gondolas, the gondolas in the Marketplace stores are only four-feet high and resemble sales, and very recently six locations were up and running pods that are set at an angle, making it easier for custom- with a wine selection, located in the same licensed areas as the beer. ers to scan the store. “Wherever we have beer we are going to be adding wine,” When planning the design, Kum & Go also took into account what would make the store a better place to work Perkins said. For the wine section, Rutter’s worked with a local manufor associates. “We had heard that cleaning tile floors and grout is really a time consuming and arduous process. So facturer to develop wine racks to display 750-milliliter and the floors in our Marketplace store are polished concrete, 1.5-liter wine bottles, and three-liter (the limit per purchase by Pennsylvania law) box wine. and so it’s much easier to clean,” Bell said. Rutter’s internal team created side panels and graphics for the wine section using earth tones to convey a more BEER & WINE Not all design changes incorporate the entire conve- upscale feel. It also uses graphics to tie its wine offering with its foodservice. All the little touches work to make Rutter’s a nience store. After Pennsylvania changed its beer laws, Rutter’s began destination for beer and wine. CSD ‘luxe’ feel.” The store also features accents of red—Kum & Go’s signature color. Kum & Go’s brand tag line is ‘Where & Means More’ and the chain added the brand accent of the & symbol throughout the design. For example, a discernible red ampersand that lights up hangs from the ceiling, and the door handles of the Marketplace store are ampersands. Outside of some of the Marketplace stores an eight-foot ampersand greets guests. Kum & Go partnered with a local art company in Des Moines, Iowa called Sticks to create the giant ampersand. “We work with them to find local attractions and the things that define a community and then they painted those on the ampersand in a way that’s fun. The back side of the ampersand features our core values and the things that are important to us,” Bell said. “We call it a love letter to the community. We wanted it to be something to inspire hometown pride. We’ll see people taking selfies in front of it or graduation photos.”

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NEWSTUFF Creations & Innovations to Convenience Products and Services

REFRIGERATED CONE DISPENSER Tomlinson’s Simpli-Flex Ice Cream Cone Dispenser CABINETS organizes and dispenses cake cones, waffle cones, Hoshizaki America Inc. has introduced door and drawer combo cabinets to its refrigerated undercounters and worktops line up. The 48-inch wide cabinets, CRMR48-D2 and CRMR48WD2, include 13.66 cubic feet of interior storage, two stainless-steel drawers and one spring-assisted, self-closing door. Each drawer can accommodate one 1/2 and one 1/3 size, six-inch deep pans. Each door section comes with one 21-inch wide and 16-inch deep epoxy shelf. The 60-inch wide cabinets, CRMR60-D2 and CRMR60-WD2, include 17.55 cubic feet of interior storage with two stainless-steel drawers and one spring-assisted self-closing door. Each drawer can accommodate one full-size, six-inch deep pan. Each door section comes with one 27-inch wide and 16-inch deep epoxy shelf. Undercounter units, CRMR48-D2 and CRMR60-D2, are 33.63-inches tall on four-inch casters, while Worktop units are 40-inches tall on six-inch casters. All units have a stainless-steel exterior front, sides and top, as well as stainless-steel interior walls and floor, making these refrigerators durable and easy to clean.

For More Information From Hoshizaki America Inc. www.hoshizakiamerica.com

BACK-OFFICE SOLUTION CStorePro is an all-in-one back office solution for busy convenience store owners. The platform has everything you need to manage one, 10, even 50+ stores and gas stations in one easy-to-use package. You can easily change prices and create promotions, monitor your inventory and sales in real time, and get accurate reports in seconds—and do it all from any device, anywhere. Get started today with two free months.

For More Information From CStorePro (866) 265-5826

Convenience Store Decisions

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For More Information From Tomlinson Industries (216) 587-3400, ext. 112 www.tomlinsonind.com

HAM AND CHEDDAR LINK The classic ham and cheese sandwich just got an on-the-go update to satisfy your busy customers. The OSCAR MAYER Honey Ham and Cheddar Link is a tasty OSCAR MAYER pork link that combines ham, a touch of honey and KRAFT OLD ENGLISH Cheddar Cheese. Packed with rich, grilled ham and cheese flavor, the new link is the latest addition to the OSCAR MAYER roller grill portfolio. While the nostalgic aromas of ham and cheese may lure your customers to the roller grill, the fact that consumers are snacking more may also help drive sales. Some 56% of consumers are actively trying to include more protein in their diet (MenuTrends keynote report, 2016). While the Honey Ham and Cheddar Link might not fall under “traditional” snacks, 96% of operators offer menu items that can be considered “snackable,” but only 32% position the item as a snack (Datassential, Keynote: Snacking, 2017). By positioning the Honey Ham and Cheddar Link as a high-protein snack, you can take advantage of this growing trend and increase foodservice profits. You can save up to $150 with $2.50 off per case through Dec. 31, 2017. OSCAR MAYER even helps you promote your new roller grill offerings with a free merchandising poster kit.

For More Information From The Kraft Heinz Co.

www.cstorepro.com/2free

sugar cones and more. These NSF-listed dispensers are self-adjusting to accommodate cones with a 1-3/8-inch to 3-3/8-inch lip diameter and hold cones snugly without damaging them. Tomlinson’s ice cream cone dispensers are available in polished stainless steel and gray-tinted plastic. Mounting options include wall, stand, in-counter or under-counter. Dispensers are available with accessory options including popular Z-stands and countertop rotary stands. Accessories sold separately.

www.kraftheinzcompany.com

June 2017

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ANTIBIOTIC-FREE CHICKEN Brakebush has a significant portfolio of chicken raised without antibiotics (RWA) to help foodservice operators meet consumer demand. The RWA options include fully- cooked, sliced or diced chicken breast items and readyto-cook IQF breast fillets, tenderloins and chunks—which provide excellent flexibility for numerous RWA menu applications. Request a sample.

For More Information From Brakebush Co. (800) 933-2121 www.brakebush.com

WINSTON ‘SELECT’ The Winston family of great cigarette brands just got bigger. To capitalize on the continued success of Winston and the opportunity in the non-menthol gold segment, ITG Brands is launching Winston Select featuring a white filter tip, king box and great taste. Available at retail this month, Winston Select joins Winston Red. With a bold full flavor character, the classic Gold and White boasts smoothness above all else. The Winston brand family continues to gain market share since it became the flagship brand of ITG Brands in June 2015. The name ‘Select’ speaks of the selection of choice tobacco that brings flavor, character and quality together in one select blend. In blind taste tests, Winston Select performed exceptionally well with adult smokers who cited Winston Select’s overall satisfaction, smoothness and character of taste. Promotional support for retailers includes the same highvalue buydowns as other brands in the Winston family of brands as well as specially marked 50-cents off pack promotions in April and June. Point of sale support includes exclusive posters and point of sale kits as well as family counter mats, with select pieces showcasing the tagline, “Meet the New Gold Standard.”

For More Information From ITG Brands LLC www.winstoncigarettes.com

STUFFED CRUST PIZZA Day’n Night Bites, a brand of Landmark Products, has announced an industry first: Double Pepperoni Stuffed Crust Pizza. The pizza is unique in two ways. First, Day’n Night Bites created the recipe using both pepperoni slices and diced pepperoni. Secondly, the pizza’s crust is stuffed with 100% mozzarella cheese. The result is a pizzeria experience unlike anything offered in c-store and foodservice spaces and definite proof that the industry has caught up with the traditional QSR menu. Day’n Night Bite’s Stuffed Crust pizza is marketed as a whole pizza and also by the slice, giving operators unusual flexibility in offering premium foods to their customers. Whole pizzas are offered straight from the freezer while the Stuffed Crust pizza slices can be cooked on-site and served hot from existing warmers. The company’s Double Pepperoni Stuffed-Crust pizza was first sampled during the industry’s NACS (National Association of Convenience Stores) Show last October. Based on extremely positive customer response, Day’n Night Bites is now testing additional recipes. Distributors are welcome to contact Day’n Night Bites directly.

For More Information From Day’n Night Bites Contact: Dana Evaro, (800) 338-4340 dana@lmpinc.com

GRASS-FED BEEF STICKS Perky Jerky is launching a new line of 100% grassfed beef sticks in the same bold flavors that make the brand’s jerky offerings a favorite amongst athletes, outdoor lifestyle enthusiasts and Millennials alike. As the meat snack category continues to grow in popularity, Perky Jerky has entered the market with a unique product offering. Filling the void for all-natural meat stick products, Perky Jerky now offers a premium option for consumers that also successfully delivers on taste. Perky Jerky’s products align perfectly as a snack option that doesn’t just taste better, but is actually better for you. Made from 100% grass-fed beef, Perky Jerky’s sticks are 59% lower in fat and 36% lower in sodium than other options on the market. Available in the following flavors: More than Just Original, Tasty Teriyaki, Brewmaster’s Pale Ale and Jammin’ Jamaican. SRP: $1.99-$2.29 per stick.

For More Information From Perky Jerky www.perkyjerky.com

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NEWSTUFF Creations & Innovations to Convenience Products and Services

PLAYFUL WASTE COLLECTION COOKIES ‘N’ CRÈME Paris Site Furnishings has introduced Creature Cans—34-gallon steel litter CRUNCHERS receptacles that are sure to attract attention for their playful designs. Four different styles are available, including a Beaver, a Frog, an Octopus and a Spider, each with a plastic liner for easy servicing. Constructed of steel that is rust proofed and powder coated for a long service life, these whimsical receptacles liven up any outdoor environment. They are ideal for parks, streetscapes, green spaces, schools and universities, sports venues, transit facilities, retail and corporate settings, or wherever durable and functional waste receptacles are desired. All Creature Cans are manufactured in Princeton, Ontario and available factory direct or through distributors and dealers throughout North America.

For More Information From Paris Site Furnishings and Outdoor Fitness sales@peml.com www.peml.com

COCONUT CHIA BITES Bare Snacks is launching an innovative new snack line, bare Chia Coconut Bites. Available in three crave-ably crunchy flavors including Chia + Vanilla, Chia + Pineapple and Chia + Flax, the new snacks combine the superfood power of chia and coconut into one deliciously crunchy bite for the ultimate nutritious snack. Each variety is made using bare’s proprietary slow-baking process, which creates a craveable crunch from simple, real ingredients. New bare Chia Coconut Bites were made available at retailers nationwide in April. The bare Chia Coconut Bites are made from delicately sliced whole coconuts that are sustainably harvested and lightly seasoned with whole-food ingredients, all perfectly baked with a generous sprinkling of small but mighty chia seeds. All three varieties are a good source of fiber and are Non-GMO Project Verified, gluten-free, and contain no trans fats, added oils or preservatives. New bare Chia Coconut Bites join the brand’s existing portfolio of Snacks Gone Simple.

The Hershey Co. has introduced Reese’s Crunchers and Cookies ‘n’ Crème Crunchers. New Reese’s Crunchers are mini-peanut butter chips, peanuts and crunchy rice crisps covered in milk chocolate. These small, delicious bites are full of sweet and crunchy tastes and textures, for the perfect combination of chocolate and peanut butter that consumers know and love. Reese’s Crunchers are ideal for any snacking occasion, anytime, anywhere. New Hershey’s Cookies ‘n’ Crème Crunchers pairs minichocolate cookies and crunchy graham wafers, covered in delicious milk crème, perfect for a delicious snack, anytime and anyplace. The sweet, small bites full of texture and crunch are a great marriage of classic tastes and easy on-the-go eating. Both products are available in a 6.5-ounce stand-up pouches (SRP $3.49) and a 1.8-ounce tube packs (SRP $1.99).

For More Information From The Hershey Co. www.hersheys.com/cstore

SNACKING ON THE GO Kellogg’s innovative c-store products meet your customers’ on-the-go snacking needs with a variety of exciting foods featuring on-trend tastes and textures that keep customers coming back, as well as expand your profit potential. The company has introduced Pringles Large Grab & Go Pizza and Jalapeño flavors. Millennials are influenced to purchase spicy flavors 30% of the time, according to Mintel’s Salty Snacks U.S. Executive Summary, April 2016. Satisfy their preference for unique flavors with Pringles’ NEW Pizza and Jalapeño Grab & Go cans. These bold editions are joining the expanding lineup of Pringles—a $165 million brand in convenience, according to Nielsen (52 weeks ending Aug. 13, 2016).

For More Information From Kellogg’s www.kelloggsspecialtychannels.com

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COOLERPACK INNOVATION Heineken is launching the “COOLERPACK,” an engineered 18-pack cardboard packaging innovation that allows consumers to chill their Heineken by simply removing the top to their case and adding ice. The COOLERPACK is the newest edition to the Heineken range of packaging configurations, bringing convenience and occasion-based purchase choice to beer drinkers everywhere. Designed to pop open the top, fill the pack with ice, and enjoy a cold Heineken, the COOLERPACK will keep consumers cool in the heat all summer long, driving incremental sales and profits for retailers who stock and display the innovative new item. Impactful Heineken POS to enhance display presence in high traffic areas of the store will drive awareness and trail of the innovative COOLERPACK. Retailers can look to maximize volume and profit and drive basket ring by cross-merchandising with ice for convenience shopping.

For More Information From HEINEKEN USA www.heinekenusa.com

PROTEIN-PACKED SNACKS Our Little Rebellion has introduced a new line of light and crispy proteinpacked snacks, Protein Crisps. Boasting 10 grams of plant-based protein per serving, the new Protein Crisps will be available in three addictively delicious, crowd-pleasing flavors: Wasabi Ginger with Honey, Hot Buffalo and Sweet & Smokey BBQ. New Protein Crisps combine bold and spicy flavor profiles with solid nutrition for a healthy yet delicious snack that anyone can feel good about. At only 90 calories per serving, the snacks are a tasty new low-calorie way to integrate more plant-based protein at lunch and dinner, between meals, before or after a sweat session, parties and more. Like all other Our Little Rebellion snacks, new Protein Crisps are popped for a satisfyingly crunchy texture and are never fried. The snacks are also NonGMO Project Verified, Certified Gluten Free, and contain no artificial anything. Protein Crisps began shipping in April 2017 with a suggested retail price of $3.99 per five-ounce bag.

For More Information From Our Little Rebellion www.ourlittlerebellion.com

FIJIAN BOTTLED WATER Savu is a new Fijian bottled water from an artesian aquifer in a protected rainforest in the Namosi Highlands, within the archipelago’s Viti Levu island. What sets it apart in the premium bottled water category is its soft, neutral taste and feel, resulting from a mineral profile that water develops as it slowly makes its way from pristine rainwater to the artesian aquifer located deep underground in the tropical Fijian rainforest. As the water filters through the rocks to the aquifer, it naturally absorbs electrolytes, enriching it with minerals such as calcium and magnesium. The remote, protected Pacific Island source gives SAVU high silica levels, low minerality, and an exceptionally low nitrate level. SAVU is slightly alkaline with a typical pH of 7.8, an alkalinity that delivers a hint of sweetness that many connoisseurs find desirable in mineral water. The water is carefully and sustainably extracted from its artesian aquifer, untouched by man, and bottled right at the source into high-quality polyethylene terephthalate (PET) plastic bottles, deliberately chosen instead of glass bottles to eliminate the extreme amount of energy required to produce and ship glass bottles to such a remote location. SAVU is available in 330-milliliter, 500 milliliter bottles and specialty one-liter bottles.

For More Information From SAVU www.savuwater.com

BFY-COATED CORN PUFFS Lehi Valley Trading Co.’s Snackworthy brand, a budget-friendly line of high-quality, great-tasting and authentic better-for-you (BFY) snacks for Millennials, has launched a line extension consisting of coated corn puffs called Snackworthy Simply Puffs. The puffs are uniquely delicious, light and crispy corn puffs coated with a variety of rich and mouth-watering flavors, including butter toffee, cinnamon roll and sea salted caramel. In step with the overall Snackworthy brand’s better-for-you positioning, Simply Puffs are gluten free, baked not fried, have zero trans fat and are “ Simply Free From 100+ Unworthy ingredients.”The Snackworthy line of snacks launched last year. Lehi Valley Trading Co. also offers Simply Puffs for private labeling with these additional flavors: Simply Caramel Puffs, Simply Coconut Puffs and Simply White Cheddar Puffs (coming soon).

For More Information From Lehi Valley Trading Co. www.snackworthy.com

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www.HuntBrothersPizza.com/CSD

844.552.9623 / www.logicvapes.us www.markten.com

Mason Ways .................................81 800.837.2881 / www.masonways.com

McLane Company ...............................7 www.mclanekitchen.com

National Tobacco ...............................47 800.331.5962

North American Bancard ...................80

NRF Protect ................................28 www.nrfprotect.com

R.J. Reynolds ..............................83

www.EngageTradePartners.com

Republic Tobacco .........................49

800.288.8888

Smoker Friendly Tobacco Festival .....37

303.442.2520 / www.smokerfriendly.com

ClassifiedAds

ADVERTISER INDEX

Smokey Mountain ..............................45 www.smokeymountainsales.com/airio/

Spark Industries ........................41 800.280.8089 / www.sparkvaporbrands.com

Subway .......................................66

203.877.4281 / www.subway.com

Swedish Match ........................22-23,53 800.367.3677 / www.swedishmatch.com

Swisher International

800.874.9720 www.swishersweets.com .........................84 www.optimocigars.com ..............Front Cover

Tillamook Country Smoker ...............15 800.325.2220 / www.tcsjerky.com

Tyson .............................................61 www.tysonconvenience.com

866.481.4604 / www.nynab.com

www.masonways.com 800-837-2881

Storage Dunnage Racks Coolers â&#x20AC;¢ Beer Caves

80 Base Sizes

Forecourt Products CStoreDecisions ecisions .com

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INDUSTRYPERSPECTIVES

Bottlenecks and Hidden Treasures Sometimes the best workplace resources are already on your staff. By Fran Duskiewicz

FRIEND OF MINE IS a retired registered nurse who odds are he or she would have waived the certification speaks fluent Spanish. This makes him worth his and been thrilled to find a hidden treasure just down the not inconsiderable weight in gold here in south- street from the main office. That didn’t happen because a couple of hide-bound, west Florida. He recently took on a part-time job at a major medi- middle managers, operating with no leeway or busical facility just to keep his medical skills finely honed. He ness experience of doing the actual work, dismissed my is often frustrated by the data systems he needs to use to potential. do his job properly. Does he know how to improve these systems? Absolutely. That’s because for over 30 years he ASSESSING TALENT A number of years ago, Topps Markets bought P&C owned and operated a medical billing business that handled the responsibility for many hospitals in the Northeast. Supermarkets in central New York, and a very experienced He personally created efficient, time-saving, data entry produce buyer named Sam was out of a job. Sam looked for work, and decided that being a consultant might be and file accessing practices for his business. While my friend’s medical background is important to a good way to get his foot in the door somewhere. That his new employers, his broad experience and achieve- somewhere was Nice N Easy Grocery Shoppes, because ments as an owner of a very successful business are John MacDougall, company founder, always dreamed of being ignored. It seems that a hidden treasure within the his stores being a first-class supplier of fresh produce to company, such as my friend, should be brought to some- the communities where he operated his stores. Sam was not born to be a consultant, but it didn’t one’s attention higher up in the managerial food chain. Is it possible that the company might be paying big matter. John told him that he didn’t need a produce money to a consulting firm to do exactly what my friend consultant; that he needed a produce buyer and he offered Sam a job right then. If Sam had been forced could do? The odds are good. I, myself, have gotten bored and have begun looking to keep working through middle managers, be they HR for something interesting to do. A major company right people, recruiters or hiring managers, he might have gothere in Naples advertised for a projects manager. The ten nowhere and given up. Instead, by bypassing that opportunity looked right up my alley, so I submitted my unproductive bottleneck, and gaining access to a true resume. The recruiter and hiring manager became very decision maker, who knew exactly what he wanted, Sam was able to create a great produce program at Nice N excited and scheduled a phone interview with me. As I answered their questions and discussed the var- Easy to everyone’s benefit. My point is to examine how you are assessing talent. ious projects I had overseen at Nice N Easy, the more excited they became. I had the goods, alright. Well, until Are you overlooking someone within your own company they asked if I were a certified projects manager. Was I who might have wandered in for a job, but who has a “certified?” I said that I wasn’t because at my former com- sterling background that could be beneficial to your pany, Nice N Easy Grocery Shoppes, I didn’t need to be company? Have you assigned talent acquisition to unaccertified to manage projects during a period of 30 years. complished middle managers who toss applicants who In Naples, however, the lack of an official certification don’t meet some form of unimportant qualification or whom they deem as being too old, or not team players, proved to be a deal breaker. You should understand this is a world-class company into the circular file? If the answer to those questions is “yes,” then stop it in Florida that would pay for someone to relocate. I live five minutes down the road. If I could have met the person immediately. You’re missing out on hidden treasures. Take who required a certified project manager face-to-face, the time to find them. It’s worth the effort. 82 Convenience Store Decisions

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CIGARETTES, MOIST SNUFF

5/24/17 9:27 AM

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