Convenience Store Decisions June 2018 by WTWH Media LLC

Volume 29 • Number 6 • JUNE 2018 Business Solutions for Retail Decision Makers

® A

HARBOR COMMUNICATIONS

P U B L I C AT I O N

The Shifting Outlook

for E-Tobacco The FDA has set its sights on lower-risk alternatives to cigarettes. However, heat-not-burn products and other innovations still face a lengthy road to market.

IN OUR ANNUAL TOBACCO ISSUE:

Cigarette Smugglers Stub C-store Sales 36 Making the Cigar Category a Top Draw

RYO Tobacco Earns Irreplaceable Status 54

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your business LEGISLATION / REGULATIONS SALES STRATEGIES

COMPREHENSIVE RESOURCES

CONSUMER INSIGHTS

MERCHANDISING SOLUTIONS

SALES & PROFITS

COLLABORATION

LEADERSHIP BRANDS

At AGDC one of our goals is to help drive our customers’ success. We represent the Altria Operating Companies’ vast portfolio of industry-leading brands. We aim to develop sales strategies that align with current consumer insights and your operational goals. Work with us and take advantage of our comprehensive resources to evolve and elevate your business.

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June 2018

Vol. 29 • No. 6

CONTENTS 28 COVER STORY

The Shifting Outlook for E-Tobacco The FDA has set its sights on lower-risk alternatives to cigarettes. However, heatnot-burn products and other innovations still face a lengthy road to market.

EDITOR'S MEMO

TECHNOLOGY

8 Celebrating Next-Generation Leaders

68 What Is the Value of API?

FRONT END

OPERATIONS

10 On Location: Dash In Revitalizes for the Future

70 Connecting Through Loyalty

17 Industry News

BACK END

16 CSD’s Quick Bites

18 C-Stores Battle Human Trafﬁcking 20 Convenience Store Solutions:

Discipline Is Part of

the Job 21 Maverik Offers the Latest on Vape 22 2018 Tobacco Legislative Roundup 24 Column: Mary Szarmach: Honoring One Company’s Roots 26 Column: Jim Calvin: NY C-Stores Want Rule Changes

CATEGORY MANAGEMENT

74 Products at Work: Cue Vapor 76 Product Showcase 80 Quick Stop 81 Ad Index

82 Industry Perspective: Analyzing Your Stores’

Life Cycles

36 Cigarette Smugglers Stub C-Store Sales

40 Igniting E-Cig Innovation

44 Making the Cigar Category a Top Draw 48 More Consumers Go Smokeless

54 RYO Tobacco Earns Irreplaceable Status 58 Acclaim for Tobacco Accessories

FOODSERVICE 60 Applauding America’s Zest for Pizza

64 Quick Foods Magnify C-Store Menus

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

EDITORIAL

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

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

OFFICE LOCATIONS

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

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Contributing Editors Anne Baye Ericksen Pat Pape Brad Perkins Jeffrey Steele Columnists Tom Briant Jim Callahan Jim Calvin Travis Hanke Mark Radosevich Mary Szarmach Production Manager Barbra Martin bmartin@csdecisions.com

VIRTUALMART ADVERTISING

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

Webmaster Dave Miyares dmiyares@csdecisions.com

NATIONAL ADVISORY GROUP (NAG) BOARD

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

SUBSCRIPTION INQUIRIES

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

YOUNG EXECUTIVES ORGANIZATION (YEO) BOARD

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

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

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

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EDITOR’S

Memo

Celebrating Next-Generation Leaders

HE CONVENIENCE STORE INDUSTRY’S YOUNG executives face unique challenges as they grow their businesses in the competitive c-store market. The National Advisory Group’s (NAG) Young Executives Organization (YEO) was formed specifically to addresses these challenges and help the industry’s leaders of tomorrow identify solutions with others in their age group. Last month, Cumberland Farms hosted this special group of next-generation leaders for the 5th annual YEO Conference at its headquarters in Westborough, Mass. The two-day event attracted more than 65 attendees from 40 c-store chains for educational sessions, store tours and networking opportunities with other young leaders from across the convenience store industry. Members heard from an all-star cast of guest speakers including John McMahon, chief human resources officer for Cumberland Farms; Linda McKenna, a principal with Convenience Store Coaches; Peter Tedeschi, the former president and CEO of Tedeschi Food Shops and a current Congressional Candidate for Massachusetts 9th Congressional district; Thomas Cacciola, vice president of facilities support and environmental affairs for Cumberland Farms; Jill Johnson, president of Johnson Consulting; and John Schaninger, president of The Schaninger Group.

mission is to cultivate young talent “inYEO’s the convenience store and petroleum industry through implementation of education and networking.

”

In addition to speakers, who lectured on a broad range of leadership issues including developing a corporate culture, engaging the Millennial workforce, effectively communicating with store personnel and the importance of working with government representatives, YEO members got out into the field for store tours. The group visited Cumberland Farms’ test c-store, warehouse and commissary on day one, and on day two toured the newest stores from Alltown, Seasons and VERC Enterprises. Thank you to our speakers and the convenience store chains that opened their doors for conference attendees.

For any questions about this issue or suggestions for future issues, please contact me at jlofstock@ csdecisions.com.

to partner with Habitat for Humanity’s Operation Playhouse just prior to the start of the conference. Working with Cumberland Farms’ employees, three teams of 12 worked together to construct playhouses that were donated to the families of three local veterans. YEO’s mission is to cultivate young talent in the convenience store and petroleum industry through implementation of education and networking. I can’t think of a better way for the convenience store industry’s next generation of leaders to bond and network than by joining together in the service of others for such an important cause. I am very proud that our members displayed their leadership skills and initiative outside of the office to benefit military veterans. This was entirely a volunteer opportunity, but the response to participate was extraordinary. What was even better was the dedication ceremony to three combat veterans from Massachusetts. As a result of the hard work of our members and the Cumberland Farms team, six overjoyed children were presented with playhouses. The veterans included: • Darren Hebert, who is still active in the Army and has served two combat tours—2002-2003 in Afghanistan and 2009-2010 in Iraq. Herbert has a young son and daughter. • John Washburn, who also is currently serving on active duty in the Massachusetts Army National Guard and was deployed to Afghanistan in 2010. He has two children, a nine-year-old son and a two-year-old daughter. • Daniel McNally, a munitions technician who served in the Air Force from 2005 to 2008. He was deployed two times to Iraq and Afghanistan. McNally has two-year-old twins. Congratulations to everyone who participated. I’m sure it’s an event that they will remember for years to come. I also want to thank our sponsors and Cumberland Farms, who made all of this possible. The Cumberland team went out of their way to make everyone feel right at home and sponsors Altria, Apter Industries, McLane, PDI, R.J. Reynolds, SKUPOS ensured members had a rewarding experience. I’m already looking forward to next year.

Operation Playhouse Developing a solid foundation for young executives is one of the cornerstones of YEO. The group was privileged

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FRONTEND

Profile

Dash In Revitalizes for the Future From updating locations with open kitchens and a freshly-prepared foodservice program to growing its alcohol selection—not to mention planning for a dozen new stores—the Maryland-based chain is gearing up for tomorrow. By Erin Del Conte, Senior Editor

Dash In’s 5,600-square-foot concept store opened in April in Chesterfield County, Va. The prototype creates a store experience focused on “fresh thinking,” which promotes everything from the design of the store to the fresh food available.

ASH IN FOOD STORES RECENTLY unveiled a 5,600-square-foot prototype convenience store in Chesterfield County, Va. on 2.4 acres, featuring 16 fueling positions, an open kitchen concept and a growler/ crowler program. The 55-store chain, which also operates 38 Splash In ECO Car Washes, is set to embark on an aggressive growth plan to open about a dozen new stores, grow its fleet of car washes and modernize its existing locations in the next two years. “We’re going through a pretty aggressive process of re-investing in the chain through re-development. We’ll probably re-develop as many sites in our existing network as we will bring on new sites,” said Dash In President Julian “Blackie” Wills, the fourth generation in The Wills Group family business. Dash In was founded by Wills’ father, Lock Wills, and is one of the subsidiaries of Wills Group, which began in 1926. The first Dash In cstore opened in 1979 in Laurel, Md. FRESH THINKING Dash In’s 5,600-square-foot concept store, which opened this April, in Chesterfield County, Va., 20 miles

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outside of Richmond, Va., creates a store experience around “fresh thinking,” which informs everything from the design of the store to the fresh food available. The concerted concept is expected to drive the overall growth and direction of the Dash In brand over the next few years. “We built an entire new store experience that can serve as the new benchmark for what we envision the Dash In customer experience being for the consumer,” Wills said. The holistic approach is meant to envelop shoppers once they enter the store. “The goal for Dash In is to make life more rewarding for time-stretched people by emphasizing a sense of local and personal connection that transforms the necessary errands of today’s busy life into engaging experiences,” Wills added. “We think this site in Chesterfield County is the initial expression of where we’re taking the new brand and trying to build this elevated consumer experience.” Dash In worked with several design partners and a brand consultant to create the new location, which features earth tones and materials—such as brick and wood siding, an exposed ceiling and subway tiles.

Dash In brought local elements into the design, including sepia-tone imagery of the James River to convey the Dash In’s brand’s commitment to being a local, neighborhood store. Exterior architectural elements of the prototype were influenced by Jeffersonian architecture. The site also features a 52-footlong roll-over Splash In ECO Car Wash, open 24/7, seven days a week, with six free vacuum stations and weather canopies. EXPANDED SELECTION The new location is Dash In’s first 5,600-square-foot store. Most other recent stores have been around 3,400 square feet. The larger footprint allowed Dash In to take advantage of local alcohol sales laws and introduce a growler/crowler program, as well as an expanded wine wall featuring 90 choices, and a beer cave. The growler/crowler program features eight taps and beer from more than 200 craft breweries in the state of Virginia. “We think there’s an opportunity within the c-store space to offer an elevated experience with craft beer,” said Wills. “We targeted Richmond specifically because there’s 37 brewer

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FRONTEND

Profile

ies located in the Richmond area and it skews very high for craft brewing.” The growler program features 64-ounce glass jugs or ‘growlers,’ which can be filled on site, and the crowler program features smaller 32-ounce aluminum cans or ‘crowlers.’ Crowlers offer a longer shelf-life, retaining freshness for a few weeks. Customers can also exchange old growlers for a new one on their next refill, while the crowlers are recyclable. The beer fill-up plus growler/crowler retails for $7-$24 depending on the beer purchased. Dash In is the first retailer in Virginia to offer a crowler program. Using the third-party mobile app, Tap Hunter, Dash In updates customers on the specialty beers on tap each week. “So far we’ve tapped 21 Virginia breweries, 20 regional and national craft breweries and then another six micro-breweries,” said Wills. “We also offer wine from five local wineries in our wine selections including two organic wines, and we offer a mix-your-own six-pack for bottled craft beer.” Wines range in price from $4.99 to $22 per bottle. OPEN KITCHEN CONCEPT The new c-store is also the first Dash In location to introduce a new open kitchen concept. “We intentionally placed the new open kitchen in the center of the store, so when customers enter, it’s the central focal point. We also want to make clear our commitment to making fresh food,” Wills said. From

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The new open kitchen concept allows customers to view the food as it is being prepared.

foodservice, open kitchens as well as a design standpoint, Dash In wanted modern features, Dash In also plans to convey transparency around the to expand its car wash offering. food production allowing customers “We’re currently under construction to watch the food being made. for our first tunnel conveyer car wash, The open kitchen serves up items from Dash In’s ‘Craveable’ made-to- which is a large format car wash, exorder menu concept, which is already pected to open later this year,” Wills rolled out to other locations. Dash In said. “It’s co-located with a Dash In plans to eventually transition all 55 ex- location, so we’re looking to grow not isting locations to the Craveable menu, only our Dash In stores, but also our which features artisan sandwiches, Splash In ECO Car Wash chain congrab-and-go wraps and salads made currently. In most cases they will be in-house daily, as well as an all-day co-located at the same sites.” breakfast with freshly-cracked eggs. Favorite menu items include the COMMUNITY PARTNERS The Wills Group, in April, released its Cranberry Chicken Salad Croissant and the Turkey Cucumber on Ciabatta. The 2017 Community Engagement Report, Chesterfield site has introduced two “Keeping Lives in Motion,” which highlights its increased commitment to comnew menu items including the Chicken Parmesan Slider and the Buffalo Chick- munity engagement and giving back in en Quesadilla, which are in the process communities across Delaware, Maryland, Virginia and Washington, D.C. The of rolling out to other locations. The open kitchen will also even- Wills Group focuses on areas where it believes it can make the greatest imtually be introduced to all Dash In pact: Eliminating Childhood Hunger stores. “The intention is within the next five years, we really want to total- and Ensuring Safe and Healthy Homes. “Dash In is involved with our childly modernize the chain to include this hood hunger effort,” Wills said. “We’re new open kitchen, so that our brand is very consistent between stores,” working to incorporate that effort into Wills said. “We’re really focused on our community engagement around re-shaping the customer experience.” our store openings. I think that that’s an essential component of our commitGROWING FORWARD ment to demonstrate to customers that we’re invested in the community.” In addition to introducing around In 2018, Dash In aims to add fund12 new stores in the next 24 months and upgrading existing locations with raising at the store level as well.

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QuickBites

Favorites by U.S. Region

The top three chains on the Composite Loyalty Index in each major U.S. region were:

MOBILE-ENHANCED

SHOPPING

Millennial parents turn to their smartphones at every point during a shopping trip: • 78% use their phones to research products (compared with 58% of other parents), • 75% to check prices or availability (also compared with 58%), • 71% to pay at checkout or place an order (compared to 51%),

Shell, Kwik Trip, Wawa, Cumberland Farms, Chevron, QuikTrip, QuikTrip, Speedway RaceTrac Wawa, 76 Speedway

• 71% will leave a review, process a return or chat with customer service after purchasing (compared with 43% of other parents). Source: National Retail Federation’s quarterly Consumer View, May 2018

Source: Market Force survey, conducted online in March 2018 across the U.S.

Customers Want Value

Value menu trafﬁc for total QSR increased by 10% and consumer spend by 13% in the ﬁrst quarter of 2018. Source: NPD Group, May 2018

Proﬁle of the Clean Label, Organic Customer Packaged Facts’ recent report “Organic and Clean Label Food Consumer in the U.S.” found customers seeking organic and clean label products often include the following characteristics: • Belonging to Millennials and younger Generation Xers. • Being part of Hispanic and Asian ethnicities.

• Residence in the Northeast and Paciﬁc regions of the U.S. • Possession of an advanced degree (beyond college).

• Children in the household, particularly younger children.

• Having an annual household income of $100,000 or more.

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INDUSTRY

News

Ferrara CEO Outlines Strengths After Nestlé Acquisition The Ferrero Group recently completed its acquisition of Nestlé’s U.S. Confectionery business, which is now being manTodd Siwak aged by Ferrara Candy Co., which Ferrero acquired last December. Todd Siwak, CEO of Ferrara Candy Co. sat down with CSD at the Sweets & Snacks Expo in May to discuss the future now that the merger is complete. Ferrara now offers more than 35 iconic brands following the merger with Nestlé, and is now the second largest non-chocolate manufacturer, the first largest seasonal manufacturer and the fourth largest chocolate manufacturer in the confectionery industry. This new scale created through the merger will give c-store retailers new resources to grow their candy business, such as category management, consumer and category insights and retail merchandising. In the fourth quarter, customers can expect to see new and updated campaigns, and revitalized products from fresher ingredients to updated packaging on certain items, including Butterfinger. Customers can rest easy that these iconic brands won’t be going away. Rather, the company will continue to invest in its portfolio and expects to double its marketing investment in 2018 compared to historic levels.

Altria Group Introduces New Structure Altria Group Inc. has introduced a new structure to maximize its core tobacco businesses while realizing its aspiration to be the U.S. leader in aucstoredecisions.com

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thorized, non-combustible, reducedrisk products. Key components of this new structure include: • Establishment of two divisions – core tobacco and innovative tobacco products; • Creation of a Chief Growth Officer function to accelerate speed to market for innovative products and technologies; and • Aligning product development efforts more directly to the core and innovative tobacco product businesses. PM USA, USSTC, Middleton and Nat Sherman will form Altria’s core tobacco division. Jody Begley, as senior vice president, Tobacco Products, Altria, will oversee the core tobacco businesses, product development and engineering support. He will report to Billy Gifford, vice chairman and CFO. Leading those businesses will be: Heather Newman, president and CEO, PM USA; Shannon Leistra, president and CEO, USSTC; Ryan Bauersachs, managing director and general manager, Middleton; and Dominik Meier, managing director and general manager, Nat Sherman.

Global Partners Acquires 37 C-Stores From Champlain Oil Global Partners LP is acquiring the retail fuel and convenience store assets of Vermont-based Champlain Oil Co. Inc. The acquisition includes 37 company-operated gas stations with Jiffy Mart-branded convenience stores in Vermont and New Hampshire, and approximately 24 fuel sites that are either owned or leased including lessee dealer and commission agent locations. The transaction also includes fuel supply agreements for approximately 70 gas stations, primarily in Vermont and New Hampshire. The stations market major fuel brands such as Mobil, Shell, Citgo, Sunoco and Irving.

Tanner Krause Named Kum & Go President Tanner Krause, the fourth generation of family-owned convenience store chain Kum & Go, has been named president of the Tanner Krause company, effective June 1, 2018. In this role, he will oversee Marketing, Operations and Human Resources functions for the company. His father, Kyle Krause, current CEO & president, will transition to chairman & CEO.

High Court Rules in Favor of Employers The U.S. Supreme Court in a 5-4 ruling decided that companies can require employees to accept individual arbitration—in other words, they have the right to ban workers from joining together as a collective when bringing complaints. USA Today reported that the May 21 ruling will impact about 25 million workers who sign arbitration agreements without knowing, only to learn later collective action is prohibited.

Tariffs Would Disrupt U.S. Economy The National Retail Federation (NRF) told the Office of the U.S. Trade Representative (USTR) that the recently proposed tariffs on Chinese goods would destroy U.S. jobs, disrupt supply chains and increase prices for consumers during the holiday season. The NRF and the Consumer Technology Association find tariffs would reduce U.S. gross domestic product by nearly $3 billion and destroy 134,000 American jobs. June 2018 Convenience Store Decisions 17

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FRONTEND

News

C-Stores Battle Human Trafficking Convenience Stores Against Trafficking (CSAT), a program of national nonprofit In Our Backyard, works with the c-store industry to combat human trafficking in the U.S. By David Bennett, Senior Editor

ecause human trafficking is a vastly underreported crime, many Americans don’t appreciate how wide spread it is nationwide. Also unknown is how the c-store industry is uniquely positioned to play a vital role in disrupting this criminal enterprise and help victims of human trafficking. The International Labor Organization estimates that there are at least 40 million victims of human trafficking globally, with hundreds of thousands in America. The victims of this crime in the U.S. are men and women, adults and children, and foreign nationals and U.S. citizens. Juliana Williams, program director of Convenience Stores Against Trafficking (CSAT), a program of national nonprofit In Our Backyard, works with the c-store industry to combat human trafficking in the U.S. “CSAT launched officially January 2017,” said Williams. “We started doing grassroots outreach to cstores around the Super Bowl three years prior.” GROWING NETWORK Now, there are more than 11,000 c-store locations in 22 states that are currently involved with the program, which is expanding at a rapid clip. Williams explained that such convenience store locations are logical sites to help combat the crime, for several reasons: •C-stores serve half the U.S. population daily, usually have public restrooms, are open long hours and offer convenience through more than 150,000 locations. •The industry has a unique opportunity to help victims of human trafficking. •Traffickers may bring victims to c-stores to purchase food, fuel, ciga18 Convenience Store Decisions June 2018

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rettes or to clean up in the restroom. •Human Trafficking happens 365 days a year in every zip code in America. ENMARKET SIGNS ON Earlier this year, Savannah, Ga.based Enmarket Inc. announced it had reached an agreement with Brabham Oil Inc. to purchase its portfolio of 34 locations. Brabham Oil’s stores, branded as E-Z Shop, operate throughout South Carolina. The purchase marks the second acquisition in recent months for Enmarket. The company on Dec. 1, 2017 completed the deal for 35 Clyde’s Markets locations in southeast Georgia. Enmarket’s area of operation now includes 122 stores in Georgia, South Carolina and North Carolina. This same region is becoming known as an

What to Do if You Suspect Human Trafficking • Write down a physical description (age, race, height, tattoos, scars, and identifying characteristics). • Write down a description of vehicles involved (color, make, model, license plate and state). • Note time of day to help authorities search video to identify the traffickers and victims. • Do not confront a suspected trafficker directly or alert a victim to any suspicions. It is up to law enforcement to investigate suspected cases of human trafficking. • Immediately after traffickers and victims have left, call the National Human Trafficking Hotline at (888)373-7888 and report what you observed.

area experiencing more occurrences of human trafficking. It’s thought that metro Atlanta’s reputation for having one of the world’s busiest airports and being a convention city makes it a hotbed for human trafficking. Moreover, the Department of State lists Georgia and North Carolina among the top eight states in the U.S. with the most human trafficking cases in 2017. In Georgia, 276 cases of human trafficking were reported last year, according to the National Human Trafficking Hotline. North Carolina had 221 reported cases. It was during a conversation with Williams that Enmarket opted to participate, said Matt Clements, Enmarket’s director of marketing. “When she explained how simple it was to participate in the program, we were happy to become a part of the effort,” Clements said. Currently, Enmarket carries phone card placards in all 122 of its participating stores, but has expanded the program recently. “We have used some of the training tools that CSAT has provided as part of our new employee training procedures,” said Clements. “We’ve also scheduled quarterly communications to stores, reminding them about the program and what to do if they see any suspicious activity at a store.” CSAT provides training so c-store employees understand the indicators of human trafficking and proper response protocols, using a brief video and printed reference cards for instore use. “Our hope is that an employee will trust his or her gut and make a phone call immediately after suspected traffickers and victims have left the store,” said Williams.

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CONVENIENCE STORE SOLUTIONS

Discipline Is Part of the Job Communication is always a key motivator. By Jim Callahan, Contributing Editor

HILE IT’S NEVER EASY TO discipline employees under your watch, it’s often necessary. Simply put, discipline is part of the job. It has always been my experience that when it comes to employees, corrective action should be done at the time of the offense. To delay action really amounts to procrastination and that hurts you as well as the employee involved because the emphasis on the particular policy or regulation you are trying to enforce erodes proportionally with the time it takes to remind the worker of the right step he or she should have taken in the ﬁrst place. Rather, administering discipline is like that old adage of pulling off an adhesive bandage: fast and clean. Do it while the incident is fresh in both your minds and make sure the punishment is fair and the worker understands why such action was taken. DUE PUNISHMENT For me, a minor ﬁrst offense often warranted a verbal warning. The offense—being late, talking on a cell phone or wearing an improper uniform can be corrected easily enough. Just make sure the individual is aware that any future occurrences might result in a written counseling. Inform them of not only what they did wrong, but also what the correct procedure is for the occasion. For items such as tardiness, dress code infractions etc., remind them how foolish it is to fail over such small and avoidable things. How is someone to know they are doing wrong if they are not told? And, how can that individual get better on the job and reach their next plateau if you don’t make them aware of their infraction? Lastly, delaying such a necessary conversation causes ambiguity in the workplace. If company policy isn’t enforced consistently, it can cause confusion down the road. LET THEM KNOW A good employee wants to be informed when they err and a not-so-good employee needs to be told when they step out of line. It’s said that people don’t do what you expect, rather they do what you inspect. Inspecting performance falls under the guise and eyes of a supervisor and how well you inspect has a very direct bearing on

20 Convenience Store Decisions June 2018

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Jim Callahan has more than 40 years of experience as a convenience store and petroleum marketer. His Convenience Store Solutions blog appears regularly on CStoreDecisions.com. He can be reached at (678) 485-4773 or via email at jfcallahan1160@ gmail.com.

how well your department will function and of course, how those above you will view it. When it comes to rewards and discipline of staff at the store level, most instances aren’t black and white even if you follow policy closely. Here are a few considerations when it comes to inspiring better performance: • If an employee has earned the status necessary to be promoted, earn a bonus or a raise in pay, communicating why it has occurred is equally as important as the administrative action. A constant course of communication is part of a strong employer-employee relationship, making all the wheels turn. • Conversely, should an employee earn some disciplinary action, whether it’s a verbal warning, written notice or even something as drastic as a ﬁring offense, swift action is merited. Also, good communication is vital throughout the process. Lack of communication—no matter the situation—eventually gums up the works. • It’s important to note that good communication is a twoway street. Explaining company policy and proper procedure is essential, but listening to an employee explain why he or she fell short of a standard can provide great insight into what is going on in his or her life. As a result, it can help you manage in a more even, empathetic manner. Quite often there’s a learning experience involved in such situations and hopefully such a situation enables the worker to grow into a contributing staff member, and hopefully fosters meaningful changes in how you deal with your staff. I always look for the learning experience because we all wish to learn and get better. As supervisors, it’s our calling to get better and help others get better so that they can revel in the feeling of growth and perhaps, take better care of their own family. I would be remiss if I didn’t remind you that taking the extra time and doing your due diligence to make absolutely sure that the person you are hiring is the right ﬁt for the position will save you much anguish in the long run. Once, they’re aboard, the real work can begin. cstoredecisions.com

5/25/18 1:33 PM

FRONTEND

E-Tobacco

Maverik Offers the Latest On Vape

Travis Hanke, category manager for the Utah chain, has been busy this year assessing new category offerings. By David Bennett, Senior Editor

Travis Hanke manages the cigarette, tobacco & general merchandise categories for Maverik.

o far this year, the e-tobacco segment—including ket—hence its rousing sales in the c-store channel. How e-cigarettes—is experiencing a progression of new is JUUL performing for Maverik? TH: JUUL’s national success has been unprecedented in product and new integration. For example, JUUL by PAX Labs is seeing tremendous sales with pods filled with a relatively young vape category. This unprecedented suce-juice and is easy to use. Plus, RJ Reynolds (Vuse) and cess has created some supply chain opportunities, which Juul has been working very hard to address. Maverik is partAltria are both heavily invested in e-cigarette lines. This past February, blu celebrated the launch of myblu nering with the JUUL team to launch JUUL later this month. with its most expansive flavor range yet—with pre-filled liq- Maverik is very excited to have the JUUL brand added to the vape offering for our customers. uid pods featuring 11 flavors. Travis Hanke manages the cigarette, tobacco and generCSD: Are there any e-tobacco name brands that are al merchandise categories for the Salt Lake City, Utah-based Maverik c-store chain. Hanke met with CSD to explain how generating high interest from Maverik consumers? TH: ITG Brand’s myblu, Space Jam’s Byrd and NJOY are the vapor segment is booming in Maverik’s 312 stores. Convenience Store Decisions (CSD): How is the vape three brands generating the most interest. The Logic and Mistic brands are also on the radar. Both brands have been category performing for Maverik so far in 2018? Travis Hanke (TH): The vape category continues to per- significant performers on the East Coast; however they’re form very well for Maverik. Year-to-date Maverik’s unit sales starting to get noticeable traction in the Central and West are up 14% and sales dollars are up 20%. This year, Maverik Regions. has transitioned away from the open system to focus vape CSD: Vape offerings, including e-cigarettes, have atefforts on closed system product offerings on the market. tracted significant scrutiny from local legislators. Have CSD: New technology and new offerings are generat- your markets been touched by tobacco legislation pering new consumer interest, including improvements in taining to vape items? TH: To some degree, yes, specifically with labeling reNuMark’s MarkTen product line. What’s your take on quirements. Maverik’s internal legal and compliance team NuMark’s new plans for its portfolio? TH: NuMark has a lot of innovation planned in the vape combined with Maverik’s vendor partner resources have category with closed pod systems and a closed tank system. done an excellent job keeping Maverik informed and comNuMark has invested a lot of resources in these products pliant with evolving regulations. Maverik is committed to and their development. I’m excited about the potential and being a responsible retailer and complying with all local, state and federal regulations. sustainability of these new products. CSD: R.J. Reynolds Vapor Co. this past April volunBased on innovation and trends in the vape category it’s possible the traditional cigarette merchandising space on tarily initiated a nationwide safety recall of all Vuse Vibe the back bar will continue to shrink in order to expand the power units over concern over batteries. Do such sinvape merchandising space. Such an evolution is likely need- gular occurrences tend to affect consumer confidence? TH: I don’t think consumer confidence with the closed ed to effectively provide consumers the sufficient product systems has been negatively impacted by the recall. Convariety they’re looking for in the vape category. sumer demand for the vape products continue to grow. Maverik and our vendor partners continue to evolve to proCSD: How about the new myblu offering? TH: ITG Brands’ myblu pod system is intriguing. It vide the consumers the products they want. There’s been a launched in February and early results have been promising. disruption with the Vuse Vibe brand with the recall, however R.J. Reynolds and other manufacturers have responded to CSD: Some industry experts say that JUUL is far and the recall opportunity with increased promotional activity in away the easiest vape pen starter kit to use on the mar- the vape category. They are excellent partners. cstoredecisions.com

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June 2018 Convenience Store Decisions 21

5/24/18 5:16 PM

FRONTEND

NATO

2018 Tobacco Legislative Roundup

Thomas Briant is executive director of the National Association of Tobacco Outlets.

State and local regulations continue to impact the c-store space. A CSD Staff Report

ow that all but 13 state legislatures have concluded their 2018 legislative sessions, Thomas Briant, executive director of the National Association of Tobacco Outlets (NATO), sat down with us to discuss the outcome of state tobacco legislation across the country as well as ongoing local regulations retailers must contend with. Convenience Store Decisions (CSD): In the past couple of years, bills were introduced in approximately one-half of the state legislatures seeking to increase either cigarette or tobacco product taxes, but only one or two states actually enacted these higher tax rates. Is this trend holding true so far in 2018? Thomas Briant (TB): In 2018, numerous state legislatures considered legislation to raise taxes. This year, the state legislatures that considered some type of tax increases were Colorado, Connecticut, District of Columbia, Georgia, Hawaii, Kentucky, Illinois, Indiana, Iowa, Massachusetts, Minnesota, Mississippi, Nebraska, New Hampshire, New Jersey, New Mexico, Oklahoma, Oregon, Rhode Island, South Dakota, Utah, Vermont, Virginia, Washington, West Virginia and Wyoming. So far, only two states have passed legislation on cigarette tax increases. These states are Oklahoma (increasing the tax on cigarettes by $1 per pack) and Kentucky (raising the tax on cigarettes by 50 cents per pack). Both tax increases become effective July 1, 2018.

CSD: Are many state legislatures considering flavor ban legislation? TB: In 2018, only New Jersey and New York have considered banning flavored tobacco products. Of special note, the New Jersey state legislature is reviewing a first of its kind statewide ban on the sale of menthol cigarettes. The legislation to ban flavored tobacco products in each state hasnâ&#x20AC;&#x2122;t passed and is still under consideration. CSD: It appears the tobacco age 21 purchase requirement is gaining more momentum. Have many state legislatures considered bills to raise the legal age to purchase tobacco products? TB: Yes, more so than what we saw in 2017. Local governments within states are increasingly taking up the initiative to raise the purchase age of tobacco products to 21. 22 Convenience Store Decisions June 2018

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At this point in 2018, 23 state legislatures have considered or are reconsidering legislation from 2017 that would increase the purchase age for tobacco. Out of the 23 states that considered legal age increases, the legislation in 18 of those states has been defeated, missed procedural deadlines to move forward, or held for further study. Those states include Alabama, Arizona, Connecticut, Florida, Idaho, Indiana, Iowa, Maryland, Minnesota, Mississippi, Nebraska, New Mexico, New York, South Dakota, Tennessee, Utah, Washington and West Virginia. States that are still considering legislation to increase the legal age include Illinois, Massachusetts, New Hampshire, Rhode Island and Vermont. As a reminder, there are currently five states and the District of Columbia that have passed an age 21 purchasing requirement for tobacco products which include California, Hawaii, Maine, New Jersey and Oregon. Three of these states (Maine, New Jersey and Oregon) passed their increases in 2017. No additional state legislatures in 2018 have passed an age increase for tobacco product purchases. CSD: What are the most common tobacco ordinances passed at the local level in 2018 thus far? TB: In a reversal of trends from last year, the most prevalent local regulation in 2018 has been increases in the purchase age to 21. As of May 2018, approximately 300 localities nationwide have passed an age 21 purchase requirement since the higher legal age initiatives began. Thus far, the top five states with the greatest number of local governments that have passed this type of local ordinance are: Massachusetts (172) localities; New Jersey (28) localities; Illinois (22) localities; Kansas (20) localities and New York (19) localities. Also, the last part of 2017 and the first half of 2018 saw more local governments continue to pass restrictions on the sale of menthol, mint and wintergreen tobacco products. Larger cities that have recently passed restrictions on the sale of these products include St. Paul, Minn. and Oakland, Calif. On June 5, 2018, voters in San Francisco will take to the ballot box to decide whether to uphold a previously passed ordinance banning the sale of all flavored tobacco products, including menthol, mint and wintergreen products.

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FRONTEND

Tobacco Column

Honoring One Company’s Roots

Mary Szarmach is vice president of trade marketing and government relations for Smoker Friendly International.

Smoker Friendly International was launched on professional dedication. By Mary Szarmach

amily businesses aren’t unique in retail. And, if you TCSC, which is wholly owned by his family. Smoker Friendly track the roots of many family businesses, you are and Gasamat operate 104 stores in five states, as well as an likely to find that those family roots are intertwined e-commerce premium cigar business. In 1995 Terry was instrumental in the creation of Smoker with past experiences in other industries. Still, those roots all start from a single point of origin. For Friendly International (SFI), which was formed to hold the Smoker Friendly trademark and brands. SFI created a licensthe Cigarette Store Corp., that point of origin is my Dad. In this annual edition of Convenience Store Decisions, ing program for retailers to be able to take advantage of the which explores the intricate issues that inundate the to- value priced Smoker Friendly tobacco family. This program bacco category currently, the folks from CSD gave me the is in 36 states and 800 retail locations. Terry is also the chairgo-ahead instead to write about our family business and man of SFI. The company employs 575 people. In 2012, we built a its founder and his nearly 65-year career in oil, gas, conve20,000-square-foot headquarters north of Boulder. nience and tobacco. Like most successful companies, TCSC has ensured it has A lifelong Boulder, Colo., resident, Terrence Patrick Gallagher Sr. (Terry) was born and raised on a dairy farm March given back to the communities that have fostered its corporate 7, 1934. He continued to operate the family farm until 1962, success. Not surprisingly, this effort has been led by Terry. In addition to his business interests, my father has devotwhile working full time for Oriental Refining Co., where he started in 1954. His family had four operating oil wells on ed a substantial amount of volunteer time to many civic and their property along with a small distillation refinery, so the charitable organizations. He was a founding member of The Boulder Rural Volunteer Fire Department for three decades oil business seemed a good fit. Oriental was sold to a firm that became Asamera Oil US and has been very involved at Sacred Heart of Jesus Parish Inc., a public company that had exploration, production, and School, serving on the parish council, school board and refining and marketing. Terry was named president of the as athletic director. He has also served on the National Western Stock Show Denver-based firm in 1974. During this time, he was very active on several boards including the National Petroleum Board of Directors, as well as the Boulder County Fair Board Refiners Association and American Petroleum Refiners As- of Trustees. He has donated over $1 million to Juvenile Diabetes Research Foundation over the last 10 years. He sociation. In 1984, Terry purchased the retail arm of Asamera Oil continues to support The University of Colorado where he that consisted of over 100 retail gasoline locations. Along graduated in 1955 as well as Boulder High School. with that purchase came the Gasamat, trademark, which became the retail banner for the new Gallagher family busi- FAMILY VALUES He was married to my mom for 60 years, has five children, ness. During these years, he served on the boards of SIGMA, and the Colorado Petroleum Marketers Association. He was 14 grandchildren and seven great grandchildren. Family is honored as the Oilman of the year in 1989 and received its everything to him. The family business employs three children, one nephew and five grandchildren. Distinguished Service Award in 1993. Terry continues to work and be involved daily in our busiSMOKER FRIENDLY ness. At 84 years old and nearly 65 years in the business he In 1991 Terry was instrumental in the creation of The has an innate energy and leadership qualities that are unCigarette Store Corp. (TCSC) our retail tobacco store con- surpassed by anyone I’ve ever met. He’s met and made so cept. The Cigarette Store Corp. was a pioneer in this new many friends through his career and I’m sure he would tell innovative retail concept and has become nationally known you it has been a joy. I see at least another good 10 years as Smoker Friendly. Terry is the chairman of the board of of him breathing down our necks and checking on our work. 24 Convenience Store Decisions June 2018

24_Szarmach Column.indd 24

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FRONTEND

NYACS

NY C-Stores Want Rule Changes

Jim Calvin is the president of the New York Association of Convenience Stores (NYACS), a private, notfor-profit trade association, dedicated to unifying, serving and representing New York State’s convenience store industry.

Regulatory costs have always been part of the price of doing business in the Empire State, but increasingly stores must navigate increases in the legal age to purchase tobacco products, not to mention minimum price mandates, which took effect June 1. By Jim Calvin

isguided local restrictions Worth what? Do they mean the le- time, there will be minimum prices on tobacco retailing con- gitimate category sales destined to on other tobacco products (OTP)— tinue to proliferate across be lost by law-abiding neighborhood $10.95 a pack for little cigars, $8 per the state of New York in spite of the retailers for a policy that won’t work? stick for individual large cigars and best efforts of the convenience store If saving one life were the standard $8 per 1.2-ounce package of smokefor new laws, we wouldn’t let anybody less tobacco—but those price floors industry to halt their advance. The Empire State has become a drive a car, jump out of an airplane, exclude state and city taxes. And, New York City is levying a bubbling cauldron of agenda-driven cut down trees or ski down a hill. Their reasoning goes that if you local excise tax on OTP for the first attempts to impose higher purchase ages, price floors, store count caps make it illegal for 18, 19 and 20-year- time: 10% of the price floor, tacked and other encumbrances that are old smokers to buy cigarettes, they’ll onto the minimum price. You know who doesn’t have a price meant to cut tobacco use but end up all quit smoking, cutting off supply exacerbating the ever-expanding ille- to younger teens. But wouldn’t a floor? Street dealers who already con19-year-old be just as resourceful as a trol 60% or more of the Big Apple’s gal trade epidemic. 15-year-old in circumventing the pur- cigarette market and couldn’t care less TOBACCO 21 chase age? Don’t they have any older about the legal purchase age, and online vendors who sell the same cigars Funded by taxpayer dollars, defiant friends or relatives who smoke? Couldn’t they drive to adjacent we do, but without any state or city of the U.S. Food and Drug Administration (FDA)’s standing as omnipotent counties or states where the legal taxes or age verification whatsoever. regulator of tobacco, and enabled by purchase age remains 18, or tax-free These new price floors will succeed politicians afraid to ask tough ques- Native American enterprises where only in chasing more tobacco customtions, the anti-smoking zealots have there’s no health department monitor- ers away from licensed, tax-collecting made headway on Tobacco 21 this ing of age verification? The much-her- stores into the arms of unlicensed, unyear, capturing Rockland and Onon- alded barrier is made of Swiss cheese. regulated and untaxed purveyors. But there’s more. From now on, daga counties and getting bills intro- Sadly, the chain of supply would reduced in at least 10 other New York main intact. A higher purchase age, New York City is going to severely curtail the issuance of new retail tobacco State jurisdictions. Most are still pend- regrettably, won’t work. Meanwhile, in New York City, the and e-cigarette licenses, aiming to ing; several have voted it down. The proponents have tried to cre- you-know-what is about to hit the gradually lower the number of outlets ate an illusion of “momentum” to fan, thanks to a mayor and city coun- by attrition. As long as elected officials care convince state legislators into pass- cil who constantly try to one-up each more about appeasing public health ing Tobacco 21 statewide this session. other on bashing tobacco retailers. advocates than understanding the Never mind that for every county that PRICE MANDATES true impacts of their agenda on lawhas adopted it, three have not. On June 1, breathtaking new mini- abiding retailers and consumer behavAt the local level, haloed public health advocates cram local public mum price mandates took effect. The ior, New York convenience stores will hearings, professing, “If this saves floor for a pack of cigarettes rises to continue to face regulatory threats to even one life, it will be worth it.” $13, including all taxes. For the first the tobacco category.

26 Convenience Store Decisions June 2018

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cstoredecisions.com

5/24/18 5:18 PM

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Cover Story

Tobacco

The Shifting Outlook for E-Tobacco The FDA has set its sights on lower-risk alternatives to cigarettes. However, heatnot-burn products and other innovations still face a lengthy road to market. By David Bennett, Senior Editor

ow regulatory groups view future vaping products as viable, less harmful alternatives to combustible cigarettes will certainly change the future outlook of e-tobacco products. The prospect not only has industry designers busy at the drawing board, but holds out hope for older category innovations as well. At the forefront is heat-not-burn tobacco technology, which isnâ&#x20AC;&#x2122;t new, but has been garnering fresh headlines. Perhaps the most attention is being paid to Philip Morris International (PMI), which has applied to the U.S. Food and Drug Administration (FDA) to be able to sell iQOS in America and for permission to market it as a modified-risk tobacco product. That designation could mean that Philip Morris would be allowed to sell iQOS to consumers as presenting less harm or risk of disease than traditional tobacco.

LEADING THE WAY In December 2016, PMI became the second company to have its Modified Risk Tobacco Product Application (MRTPA) accepted for review by the FDA in order to market its tobacco product as one that will substantially reduce, or even eliminate altogether, toxicity and/or addictiveness. By heating tobacco instead of burning it, the company says iQOS avoids subjecting smokers to the same levels of carcinogens and other toxic substances found in regular cigarettes. In the last few years, the manufacturer has spent billions to bring e-tobacco platforms to market. While PMI and its parent, the Altria Group, is making headway, it was reminded this year that regulators still have the final say. In January 2018, the Tobacco Product Scientific Advisory Committee (TSPAC) voted on several recommendations for the FDA to consider after reviewing an application from PMI for its iQOS product and Marlboro Heatsticks. The nine-member TSPAC panel voted on specific points of PMI application during the public hearing. The votes differed on specific points: 28 Convenience Store Decisions June 2018

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cstoredecisions.com

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• On a vote of eight in favor and one against, the TPSAC supported the claim that the iQOS product “significantly reduces your body’s exposure to harmful or potentially harmful chemicals.” • On a vote of five against and two in favor, with one member abstaining, the TPSAC panel stated that PMI had not proved that reducing harmful exposure would “translate to a measurable and substantial reduction in morbidity and mortality.” • On a vote of eight against and zero in favor, with one member abstaining, the TPSAC did not support the claim that the iQOS product would reduce the risk for tobacco-related diseases. • On a close vote of five against and four in favor, the majority of TPSAC panel members did not support the claim that “switching completely to iQOS presents less risk of harm than continuing to smoke cigarettes.” The TSPAC decision rejected the assertion from the company that iQOS reduces health risks. However, some industry experts are forecasting that this ruling provides the tobacco maker enough cushion to address specific TPSAC concerns, and is better prepared to address potential concerns from the FDA, which is expected to render its final decision later this year. While the regulatory process has merit, it’s still subject to varying interpretation, and uncertainty for stakeholders, said Shane MacGuill, head of tobacco research at Euromonitor International. “In an ideal world, a regulatory regime, which facilitates—or at least is neutral towards—rapid cycling of product iterations and ongoing open communication with consumers would likely foster more effective innovation in this space and more predictable consumer uptake of reduced risk alternatives,” said MacGuill. “Whether the current regime entirely precludes ‘meaningful adoption,’ I think is a matter of interpretation.” Last year, based on research headed by MacGuill, Euromonitor projected that the global cigarette market will record a $7.7 billion loss by 2021, compensated by the $13.2 billion spike in heated tobacco products sales in the same period. Scott Gottlieb, FDA commissioner, announced last July that the agency was delaying agency reviews for e-cigarette products until August 2022. The agency also announced its plan to work toward a regulation that reduces the level of nicotine in traditional, combustible cigarettes to non-addictive levels. While many manufacturers and retailers see this as a respite from the heavy regulatory cloud that has been circling the burgeoning e-tobacco industry, other stakeholders opine that the current regulatory process may be still too stringent for many alternative products to make it to market anytime soon.

“

This is not a market a little player can be in; it requires you to be a big company.

”

–Greg Conley, President, American Vaping Association

cstoredecisions.com

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June 2018 Convenience Store Decisions 29

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Cover Story

Tobacco

Euromonitor International projects a

$13.2 billion spike in heated

tobacco product sales by 2021.

At the E-Cigarette Summit, a conference on regulatory and public health developments held in D.C. earlier this year, Mitch Zeller, director of the FDA’s Center for Tobacco Products, called for a national dialogue about the difference between nicotine use and cigarettes. FDA officials have said publicly the goal is to spur innovation of tobacco products that may be less harmful for adults than cigarettes. Terry Schmitz is a zone leader for Kwik Trip Inc. and its Tobacco Outlet Plus division. He has followed the progressions in the e-tobacco market since 2007. Schmitz has helped bring many new vaping and e-cigarette products to the company’s 40 Tobacco Outlet locations, as well as Kwik Trip’s nearly 600 sites. The 32-year Kwik Trip veteran has a working knowledge of new innovations such as EAS’ Cue Vapor System pod mod system, which uses its own proprietary pre-filled flavor cartridges and is gaining much traction, and the runaway success of JUUL. Such innovations have brought the whole e-tobacco industry forward, he said. Schmitz said the panel discussion in January regarding iQOS was beneficial because it continues the conversation about a product that provides a smoking sensation with less risk. He views Zeller’s statement as a positive step in the process. “The better they (FDA) understand the product, the more they talk to 30 Convenience Store Decisions June 2018

28-32_CVR_Tobacco.indd 30

sponsors of these new products, their knowledge will increase, and hopefully they make the make the right decision to bring these products to market.”

TEXAS TOBACCO

amount of e-liquid and a precise nicotine concentration. While advances in both types continue to be introduced to the market, it’s market innovations such as heat-not-burn technology that some experts argue will reconfigure the e-tobacco industry. “There’s a reason people like tobacco and cigarettes,” said Metzinger. “It has a calming effect on your brain. The question is can the vaping industry can ever mimic that.” Metzinger, who has seen iQOS demonstrated first hand, said he views the heat-not-burn technology as the best means for delivering a similar consumer experience.

Phil Metzinger is the vice president of specialty beverage and tobacco operations for Brookshire Brothers, which operates four Brookshire Express c-stores and 45 Tobacco Barn stores in Texas, and another three in Louisiana. The company also operates 114 grocery stores, and is developing new hybrid c-store sites in Texas, which will eventually be branded Brookshire Express as well. Brookshire Brothers, which sold off 30 c-stores two years ago, has carried OTHER PLAYERS vape products since 2007. While other major tobacco com“The category is up for us,” said panies including R.J. Reynolds, also a Metzinger, referring to recent sales. leader in the e-cig/vapor market, and “It’s changed somewhat. We don’t do JTI, are growing their own heat-nota lot of open systems any longer, it’s burn product lines, the focus remains mostly closed systems that have some on how iQOS fares. type of a pod or packet that pops in.” Greg Conley, president of the In fact, Metzinger predicts that the American Vaping Association, preFDA will eventually regulate open sys- dicts the FDA will grant PMI’s tem vaporizers with more frequency application later this year, opening in the future. These include vape the door for the company to begin pens, box mods, rebuildable atomiz- bring iQOS to U.S. markets, beginers and tanks including devices that ning in the first quarter of 2019. He allow consumers to replace coils, refill acknowledges that victory could with e-liquid and use the same tank or open the door to other vaping introatomizer on several mods. ductions along the same lines as the Closed system vaporizers, on the evolving heat-not-burn technology. other hand, are vape products that IQOS is currently sold in at least foruse refillable or non-refillable pods eign countries outside of the U.S. As or cartridges. These have a precise PMI continues to gather market data

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Cover Story

Tobacco

in those countries, it will help the sule products such as the JUUL and company compile more information Imperial’s myblu,” said MacGuill. “The wider availability of nicofor the FDA to review. As a result, the e-tobacco land- tine salts (whether in pod systems or scape could appear quite different in bottled e-liquid) could also win over the following years as other manufac- some existing vape-sceptics. Heated turers look to bring their own vapor tobacco products such as PMI’s Teeps products to market—depending on and BAT’s revamped Revo which require ignition have a potentially the size of the manufacturer. “This is not a market a little player useful role to play in attracting more can be in; it requires you to be a big traditional cigarette smokers, if a sufficient risk reduction can be achieved,” company,” said Conley. he concluded. In North America—presuming ON THE HORIZON MacGuill already finds the current ongoing legalization—cannabis vaporstate of e-tobacco flush with oppor- ization will have an increasingly strong tunity for both manufacturers and influence on the vaping category in terms of competition and also shaping retailers that follow modern trends. “Along with heated tobacco, the the types of devices that are launched, next couple of years will see a big MacGuill said. Industry experts might agree there’s increase in the availability (probably to the point of saturation) of pod cap- much riding on the FDA’s final deter-

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mination of iQOS. MacGuilll is sure that the FDA still has some due diligence to do. “One would like to the think that the MRTP process is focused on the scientific evidence surrounding all vaping products, and I believe this is broadly the case,” said MacGuill. “However, of course, scientific evidence is not being interpreted and judged in a vacuum and it may be that some actors within the process want to be surer than sure before moving forward.” CSD

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Category Management

Cigarettes

Cigarette Smugglers Stub C-Store Sales Heightened black market activity continues to rob c-stores of tobacco revenue. By Anne Baye Ericksen, Contributing Editor

E Fast Facts: » Estimates show that more than half of the cigarettes smoked in New York State are purchased illicitly. » For every 100 cigarettes smoked in New Hampshire, another 86 are transported out of state. » 26 states have boosted taxes on cigarettes over the past ﬁve years.

arlier this year, U.S. Customs & Border Patrol, in conjunction with U.S. Immigration and Customs Enforcement and Homeland Security investigators, took possession of six million counterfeit cigarettes during a warehouse inspection in Florida, with a street value of more than $1 million. In May 2017, authorities from more than 20 federal, state and local agencies concluded a year-long investigation into illicit cigarette trafﬁcking in Virginia. The bust culminated in 43 arrests, 743 separate charges and shuttered a scheme that involved more than 600,000 cartons of cigarettes worth in excess of $30 million. Both cases are examples of the nation’s burgeoning cigarette black market. What the news bites don’t reveal is the impact such illegal activities have on convenience stores’ tobacco profit margins. The cigarettes in question are considered smuggled because the people who sold them didn’t pay taxes to the states they live in. “With high state cigarette and tobacco excise tax rates, cross border purchasing and illicit trade between low-taxed and high-taxed states is a growing concern,” said Thomas Briant, executive director of the National Association of Tobacco Outlets (NATO). Smuggling continues to chip away at the industry’s most valuable category, no

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matter the U.S. region. “The black market for cigarettes is extremely damaging to legitimate retailers in a couple of ways. First, it reduces sales at the stores of responsible retailers, and second, it makes it easier for youth to access these age-restricted products,” said Jonathan Shaer, director of the New England Convenience Store and Energy Marketers Association. “Worse still, it’s extremely difﬁcult to quantify the direct ﬁnancial impact linked to the black market as it doesn’t occur in a vacuum.”

IN THE BLACK The National Association of Convenience Store’s (NACS) preliminary State of the Industry report released this year indicates that, despite cigarettes still accounting for a large portion (28.6%) of inside sales last year, the tobacco category has shrunk by 8.3% since 2011. According to Nielsen data, reported by Wells Fargo Securities, unit sales of cigarettes in all retail channels dropped 4.6% for the four weeks ending April 21, and 4.4% for the previous 12 weeks. Prices during that period rose 2.4%, but not enough to counter volume losses, which in turn resulted in a 2.3% decline for dollar sales. Cigarette sales in c-stores for the same four weeks mirrored national numbers: down 4.3% in volume and 2.4% in dollar sales. cstoredecisions.com

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Category Management

Cigarettes

But a smaller smoking population is only one factor affecting product performance. The black market steals sales, too. From shipping thousands of contraband cartons to hustling individual cigarettes, black-market distribution takes on many forms. “Some [traffickers] will fill their trunks with cigarettes from Virginia by going store to store and purchasing the legal maximum, and then drive to Manhattan where they put the cigarettes in their backpacks or bags to sell on the street, said Michael LaFaive, senior director of Morey Fiscal Policy Initiative with the Mackinac Center for Public Policy. Take New York state as an example: Several studies rank it with the highest cigarette smuggling rates year after year.

CIGARETTE SMUGGLING RATES High state cigarette tax rates has increased smuggling as buyers procure discounted packs from low-tax states to sell in hightax states. New Hampshire in 2016 had the highest level of outbound smuggling—defined as cigarettes leaving a state—at 85.69% of consumption, likely due to its relatively low tax rates and proximity to high-tax states in the Northeastern U.S. Following New Hampshire is Idaho (24.95% outbound smuggling), Wyoming, Delaware and West Virginia. Legal Sales (packs) per Capita

2016 Tax Rate

2016 Outbound Smuggling Rate

New Hampshire

91.5

$1.78

85.69%

Idaho

40.7

$0.57

24.95%

Wyoming

54.6

$0.60

22.25%

Delaware

68.1

$1.60

20.72%

West Virginia

95.5

$0.55

19.57%

State

Source: Mackinac Center for Public Policy, 2017

In fact, some estimates show that more than half of the cigarettes smoked within its borders are purchased illicitly. “The tax foundation says nearly 57% of cigarettes consumed in New York state are purchased from unregulated, untaxed sources,” said Jim Calvin, president of the New York Association of Convenience Stores. Researchers at the Mackinac Center estimate the black market cost the New York government at least $1.5 billion in excise tax revenues in 2016. For c-stores each illegal cigarette carton sold represents more than just one missed tobacco transaction. “Our members have been crippled by precipitous drops in sales of tobacco and ancillary products due to tobacco customers suddenly shifting their purchases to smugglers 38 Convenience Store Decisions June 2018

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and other untaxed outlets to avoid exorbitant taxes,” said Calvin. As cigarette sales suffer, so do larger basket transactions. “All of us know fewer trips to our neighborhood facilities impact our overall ancillary sales in other categories, such as snacks, grocery items, beverages, hot prepared foods, and of course, fuel purchases,” said Lance Klatt, executive director of the Minnesota Service Station & Convenience Store Association.

TAX BURDEN Not every state struggles with an extensive illegal cigarette trade. According to data from the Mackinac Center, Nebraska, Pennsylvania, South Carolina and Tennessee have little illicit activity. That said, analysts suggest there’s a reasonable correlation between the rate of taxes in a state or local municipality and the level of smuggling a community experiences. “We update our estimates on an annual basis, and in the states with high taxes, make no mistake, there are competitors that do not follow the law, especially those with larger border populations,” said LaFaive. “In states like New York, not only is there a high state excise tax, but retailers in cities like Manhattan also deal with a city tax. They are almost compelled to participate in the illicit market so as not to lose complimentary goods sold with tobacco products.” New York state excise tax currently sits at $4.35, tied with Connecticut for the highest in the country. “Effective June 1, New York City is imposing a new excise tax on cigars and other tobacco products (OTPs), new minimum prices on cigars ($8 per stick) and other OTPs, and a higher minimum price on cigarettes ($13 per pack),” said Calvin. “These price spikes will drive even more consumers into the waiting arms of the street dealers.” While New York holds the dubious honor of incurring the highest smuggling rates, it is certainly not alone. Rounding out the top five states incurring the highest incoming smuggling rates for 2016 included: Arizona (44%; state tax $2); Washington (43%; state tax $3.025); New Mexico (41%; state tax $1.66); and Minnesota (35%; state tax $3.614). “Tobacco purchases in [Minnesota] have decreased by nearly 30% in the past two years due to high tobacco taxes,” said Klatt. Conversely, New Hampshire boasts the greatest number of cigarettes taken out of the state. For every 100 cigarettes smoked in the state, another 86 are transported elsewhere. Complicating matters is the fact that when legislators look for ways to recoup falling tax revenues associated with shrinking cigarette sales, they often land on the solution of raising taxes on more tobacco products. According to NACS research, 26 states have hiked cigarette taxes over the past five years. CSD

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Category Management

E-Cigarettes

Igniting E-Cig Innovation After a product development lull, the e-cigarette category is gearing up for a next-generation breakthrough. By Anne Baye Ericksen, Contributing Editor

hen JUUL debuted three years ago, the e-cigarette industry was preoccupied with how federal regulations classifying electronic nicotine delivery systems (ENDS) as tobacco products could affect future sales and product development. Manufacturers, tobacco retailers and convenience store category managers didn’t give the new device from a small startup company much credence at the time. Rather, they were waiting to see what type of impact the introduction of VUSE would make on proﬁt margins. The other tobacco products (OTPs) subcategory was in a slump. Soft unit growth combined with heavily discounted pricing resulted in dropping dollar sales. Would the entrance of tobacco leader R.J. Reynolds Vapor Co., currently owned by British American Tobacco (BAT), boost the emerging category? By last summer, JUUL was posting triple-digit growth measurements, which certainly helped revive the OTP subcategory. According to the National Association of Conveniece Stores preliminary SOI report, sales of e-cigarettes improved by 8.4% last year. “Within a month of introducing 40 Convenience Store Decisions June 2018

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JUUL, it became our No. 1 brand, and it has not slowed down,” said Nik DiMambro, tobacco category manager for Nouria Energy, which owns and operates convenience stores across New England.

MARKET BREAKDOWN

Fast Facts: » Sales of e-cigarettes improved by 8.4% last year. » myblu e-cigarette plans a full rollout of salt e-liquids next month.

Over the past year, JUUL continued registering near-record earnings month after month. Most recently, it experi» VUSE posted small gains in enced more than 870% growth in unit dollar sales, due primarily to sales for the four weeks ending April price increases of 17.6%. 21 per Nielsen data reported by Wells Fargo Securities. Dollar sales were equally impressive, up by more than 824%. Twelve-week measurements also exceeded expectations—more than Not surprisingly, VUSE, who has the 768% growth for unit sales and more largest share, leads that classiﬁcation at 39%, followed by MarkTen at 21%, than 744% in dollar sales. Only MarkTen and MarkTen XL Logic at 18% and all other brands Bold, both by Altria Group Inc., totaling 11%. While numerous national surveys showed substantial gains. MarkTen posted 1,000% growth in both unit confirm combustible tobacco use and dollar sales while MarkTen XL among middle and high school stuBold units jumped 105% and dol- dents continues to decline, ENDS use lar sales rose by 142% for the same has fluctuated. The U.S. Food and four weeks. However, both products Drug Administration (FDA) announced also incurred double-digit price hikes this past April it will institute a new Youth Tobacco Prevention Plan focuswhile JUUL prices fell by nearly 5%. Wells Fargo Securities also exam- ing on e-cigarettes. That said, a Centers for Disease ined which e-cigarette brands have lost the biggest market share to JUUL. Control and Prevention survey cstoredecisions.com

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PRESENTS

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Category Management

E-Cigarettes

released last year indicates a downward trend. The 2015-2016 National Youth Tobacco Survey showed e-cigarette use among middle and high school students fell from 16% to 11%. “The hysteria surrounding JUUL and teen vaping has not been helpful to moving the issue [of the FDA’s campaign to lower nicotine levels] forward,” said Gregory Conley, president of the American Vaping Association. “Those pushing these stories have a strategic advantage—they claim that usage of the product is so ‘new’ that it has yet to be captured in federal government surveys of teens. Therefore, anecdotes are allowed to control the narrative, while the data gets ignored.” But even the extensive press coverage hasn’t dampened consumer enthusiasm. “I would say the negative press has not affected our adult customer from purchasing a product they enjoy,” said DiMambro. “Since we have introduced e-cigarettes, our company has had a strict policy to treat e-cigarettes the same as any other tobacco item. We have an online training system in place to train new hires within the first two days of employment, and retrain all employees quarterly. Our policy

JUUL APPEAL C-stores cite many reasons for JUUL’s success, including:

Aesthetics/design

19%

Ease of use

18%

Smoker satisfaction

15%

Nicotine salts

15%

Nicotine content

15%

Flavor choice

11%

No ash/odor

Source: Wells Fargo Securities “Tobacco Talk” Q1 U.S. Retailer Survey, April 18, 2018

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is to ID anyone 35 or under, and our registers require us to put in the customers’ birthday regardless of age.”

WHAT’S NEXT? In addition to i t s s l e e k a p p e a rance, JUUL differs from previous e-cigarette offerings in that it uses nicotine salts instead of e-liquids. The salts are said to deliver more of a cigarette experience. Other ENDS manufacturers are looking to tap into this niche. In March, Imperial Tobacco hosted an industry showcase for its myblu e-cigarette. The compact pod device utilizes salt e-liquids, which contain half the nicotine levels of JUUL, and will be available in 11 flavors, including Classic Tobacco, Carolina Bold, Gold Leaf, Magnificent Menthol and Polar Mint. The company started testing the new product in U.S. markets in February and plans a full rollout of salt e-liquids next month. Even with limited exposure, myblu already has recorded $3.8 million in sales for the four weeks ending April 21, according to Nielsen data. Starter kits retail for $19.99 and two salt e-liquid pods are priced at $8.99. “We came away with our interest definitely piqued as myblu appears to be positioned as a real contender for JUUL with a sleek, aerodynamic design and wide range of attractive flavors,” commented Bonnie Herzog, senior analyst for Wells Fargo Securities. “I have yet to try the myblu, but I have seen vapers have very favorable reactions to it,” said Conley. “It is heartening to see divisions of tobacco companies producing products that can actually satisfy smokers and help them quit.” BAT also announced this spring it is increasing investment for next-gener-

ation products and ENDS technology. Also, it intends to initiate testing of Raptor this year, the newest product entry in the Vype line of e-cigarettes. Raptor is purported to provide users a stronger nicotine punch. This is in addition to the manufacturer seeking a modified risk tobacco approval for glo, a heat-not-burn device.

HIGH VISIBILITY “New innovations from Big Tobacco companies and trusted brands [will contribute to the category’s future success],” said Lisa Dell’Alba, president and CEO for Square One Markets Inc. The Bethlehem, Pa, company has 11 stores in five counties of the Keystone state. She’s also seen vendors increase focus on promotional programs beyond coupons. “Merchandising plans are getting increasingly better as the combustible category continues to decline,” she explained. “I think this ultimately helps draw attention to the category as a whole and improves the sales process for our team members.” DiMambro also has taken efforts to point out the OTP segment. “For Nouria Energy, the biggest contributor to the category’s success has been investing in the physical space in our stores,” said DiMambro. “By creating that space and filling it with multiple brands, we have created a place where customers have options. They no longer need to settle on the one product a store may have.” CSD

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9 TH - 12 T H BER TEM

at the beautiful Ponte Vedra Inn & Club Ponte Vedra Beach, Fla.

REG

IST

RA TIO

PEN

SEP

NAG 2018

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Committed to building profits and relationships! The National Advisory Group (NAG) is an association of small, mid-sized and family-owned c-store chains and the executives that run them. This exclusive, member-driven group convenes 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, retail information exchanges, opportunities to address burning issues within your business, a chance to get to know your peers in similar size operations and much more!

FOR MORE INFORMATION:

RETAILERS should contact John Lofstock 201.837.2177 â&#x20AC;˘ jlofstock@csdecisions.com SUPPLIERS should contact John Petersen 440.250.1583 â&#x20AC;˘ info@nagconvenience.com

5/25/18 1:22 PM

SUNDAY, SEPTEMBER 9 1 pm – 7:30 pm: Registration 1 pm - 4 pm: Hospitality Suite

4 pm – 5 pm: NAG/YEO Board Meeting 6 pm – 7 pm: Opening Reception 7 pm – 10 pm: NAG Opening Night Dinner at Ponte

Vedra Inn

9 pm – 12 am: Hospitality Suite

MONDAY, SEPTEMBER 10

7 am – 8 am: Breakfast 8 am - 8:15 am: Welcome/Conference Overview 8:15 am - 9:15 am:

Burning Issue 1: Family Business Planning. How to build

an outstanding corporate culture from the top down. Family businesses are the backbone of the convenience store industry. Having a winning culture is often the crucial difference in attracting great employees and gaining a competitive advantage over other retail chains. Family business owners are generally driven by a sense of responsibility for the stewardship of the business. They seek to manage not only the assets and performance of the business, but also the family’s most important heritage—the values that are passed on from generation to generation. Values that underpin the sustainability of the family business, and its culture. In this session, hear from three leading convenience store retailers that will highlight the importance of family leadership in the c-store industry.” SPEAKERS: • Bill Douglass, President and CEO, Douglass Distributing • Charley Jones, President and CEO, Stinker Stations • Steve Loehr, Vice President, Operations Support, Kwik Trip Inc. Moderator: John Lofstock, Executive Director, The National Advisory Group 9:15 am - 9:30 am: Networking Break 9:30 am-10:30 am:

Burning Issue 2: The Machine Revolution: Are Robotics Right for Convenience Stores? From robots in the aisle

to customer service bots, this session will deal with emerging robotic technology and how this technology will change retail in the future. Already, leading U.S. retailers such as Amazon, Lowe’s, Stop & Shop and McDonald’s are using robotics as a way to manage wage increases and rising training costs. Learn what the technological future holds for convenience stores. SPEAKERS: • Paul Martin, UK Head of Retail Operations, KPMG • Kyle Nel, Executive Director of Lowe’s Innovation Labs Moderator: Bob O’Connor, President and CEO, Jetz Convenience Centers 10:45 pm – 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

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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. 12:15 pm - 1:15 pm: Lunch 1 pm - 5 pm: NAG Golf Outing, Ponte Vedra Ocean Course. (Boxed lunch will be served.) 1:30 pm: NAG Retail Store Tours: The Best of Jacksonville 5 pm - 6: 30 pm: YEO Reception 6:30 pm - 9 pm: Dinner On Your Own to Explore Pontre

Vedra Beach

9 pm – 12 am: Hospitality Suite

TUESDAY, SEPTEMBER 11 7 am - 8 am: Breakfast 8:10 am - 9:10 am:

Burning Issue 3: Foodservice: Reigniting the Dinner Daypart. Daypart sales are growing, but this has been a

tough mealtime to crack for convenience stores. This session will deal with getting a better understanding of what customers want at this important daypart, where they are shopping and what it will take to get them in your stores. The panel will also discuss the components of building strong take-home menus that satisfy busy customer lifestyles. SPEAKERS: • Keith Boston, Vice President of Foodservice, Cumberland Farms • Carlos Acevedo, Culinary Innovation and Research Chef, Yesway Moderator: Jerry Weiner, Weiner Consulting Co. 9:15 am - 10:15 am:

Burning Issue 4: Store Design and Layout: Identifying the Best Concepts Your Customers Will Find Appealing.

A good retail store layout starts on paper, where details such as building specs, customer traffic flow and product placement come together. Every design step requires thoughtful planning and some trial and error, but when the doors are open, a stellar store layout will encourage customers to browse and buy. Hear from leading retailers on how their design successes are helping drive sales. SPEAKERS: • Danielle Mattiussi, Vice President of Retail Operations, Maverik Inc. • Jacque Hager, Director of Operations, Big 10 Marts • Spencer Thomas, Chief Operating Officer of Southwest Georgia Oil Moderator: John Schaninger, President, The Schaninger Group

5/25/18 1:22 PM

10:30 am -12 pm:

INFORMATION EXCHANGES BREAKOUT SESSIONS • Beneﬁting from the Supplemental Nutrition Assistance Program (SNAP). Learn how the new rules affect the c-store industry. • EMV Compliance. How it affects c-stores and what you

can do to save money.

Moderator: Jeremie Myhern, Vice President, Information Technology, Road Ranger • Storm and Disaster Preparedness. Whether it’s a hurricane, an ice storm or a human emergency, c-stores and gas stations should plan on how to respond effectively. • Private Label Product Branding. Environmentallyfriendly packaging, bulk offerings, new coffee opportunities, how to maintain freshness. • Human Resources: Embracing Technology. How tech-

nology and Web-based apps are helping staffing, scheduling and training employees.

Moderator: Chris McKinney, Director of Human Resources, Sprint Mart 12 pm -1 pm Lunch 1:15 pm - 2:30 pm

Burning Issue 5: Foodservice: Doing More with Less.

Foodservice remains a high growth category for convenience store owners. Given the category’s enormous profit potential, operators must embrace foodservice to attract a steady stream of customers. In this session, convenience store retailers will offer fresh ideas for maximizing the foodservice menu in small spaces. Combi-ovens, ventless fryers and other modern equipment can perform multiple functions, boosting food quality that enables growing sales and optimizing profits. SPEAKERS: • Hannah Holt, Marketing & Operations Director, Holt Oil • Stephanie Mahoney, Food Services Development Manager, MFA Oil Co. Moderator: John Zikias, Chief Operating Officer, Holmes Oil Co. 2:45 pm - 4 pm:

Y O U N G E X E C U T I V E S O R G A N I Z AT I O N ( Y E O ) BREAKOUT SESSION. Leading the Next Generation:

How to manage effectively and with authority.

When it comes to successful leadership, attributes like vision, communication and integrity never go out of style. But today’s business environment is constantly evolving and executives face new pressures every day. Executives must be able to build strong teams in the face of recruiting and retention challenges, keep up with the latest technology and demonstrate strong business acumen. As young leaders take charge of a growing workforce, they are also faced with complex issues such

as sexual harassment in the workplace and the growing use of social media. In this YEO breakout session, learn how you can stay out in front of these issues and effectively manage a crisis situation when one arises. (Open to Retailers and Suppliers) SPEAKER: • Linda McKenna, Principal, Employee Performance Strategies Inc. 5:30 pm - 6:30 pm: NAG Reception 6:30 pm - 9 pm: NAG CONFERENCE DINNER

& AWARDS CEREMONY

9 pm – 12 pm: Hospitality Suite

WEDNESDAY, SEPTEMBER 12 8 am - 9 am: Breakfast 9 am - 10:15 am:

Burning Issue 6: Building a Better Car Wash: Cleaning Up in the Forecourt. Car wash usage is surging in the U.S. and convenience stores are in a prime position to capitalize on this growing trend. But not all car wash operations are equal. Due diligence is needed when selecting the right location, deciding how much money to invest, what type of equipment is best and which cleaning chemicals are right for your market. Learn from successful car wash operators what it takes to make such a business shine and how to generate consumer interest. SPEAKERS: • Bill Martin, President, Metro Express Car Wash • Michael Meyer, Facility Operations Ofﬁcer, Meyer Oil Co. • Hill Peyton, VP, Corporate Relations, Gate Petroleum Moderator: Peter Tamburro, General Manager of Convenience Operations, Cliff’s Local Markets

10:15 am - 10:30 am: Break 10:30 am - 11:30 am: Ideas Boot Camp: Game-changing ideas retailers can take home with them that are guaranteed to boost retail proﬁtability. Foodservice expert Dr. Nancy Caldarola and NAG Executive Director John Lofstock identify best practices and opportunities from top convenience store operators around the country. SPEAKERS: John Lofstock, NAG Executive Director Dr. Nancy Caldarola, The Food Training Group 11:45 am: Conference Wrap Up and Takeaways 12 pm: Depart

Thank you to our sponsors:

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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 NAG-member 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 have a young up-andcoming executive please join us at the NAG Conference in Florida!

A Florida landmark since opening in 1928, this 300 acre Florida beach resort is located in fashionable Ponte Vedra Beach. Celebrated as one of the great Florida resorts, it is easy to see why so many choose Ponte Vedra for their Florida vacation. 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 these special rates: Golfview rooms at $209/night Oceanview rooms at $229/night

Golf rate is $130 for golf and $40 for club rentals

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 8/13/18. 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 April 15th - July 20th: Super Saver Price, $579 July 20th - August 12th: Early Bird Price, $629 August 13th onward: $779 Non-Member April 2nd - July 20th: Super Saver Price, $679 July 20th - August 12th: Early Bird Price, $829 August 13th onward: $879 Spouse/Guest $399

For additional information, contact John Lofstock at jlofstock@csdecisions.com or YEO Board Chairman Bart Stransky bstransky@racetrac.com.

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CStoreDecisions ecisions .com

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5/25/18 12:30 PM

Category Management

Cigars

Making the Cigar Category a Top Draw Despite a spate of regulatory ordinances, retailers enable cigar sales to rise. By Marilyn Odesser-Torpey, Associate Editor

onvenience store dollar sales of cigars topped $3.2 billion during the 52 weeks ending March 25, 2018, a 13.29% increase over last year, according to data from Information Resources Inc. (IRI), a Chicago-based market research firm. During the same period, unit sales rose 13.21%. Among some of the items driving the category are strong market pricing, prepriced two- and three-for packaged cigar deals and flavored options. In addition to value pricing, the foil multiple packs ensure both the customer and the retailer of product freshness “Foil packs are the place to be,” said Beau Hoffman, category manager for State College, Pa.-based Nittany MinitMart. “With the date stamped on the package you never have to worry about selling product that is past its peak of freshness.” Hoffman pointed out that the MinitMart convenience brand, which includes 26 locations in central Pennsylvania, also does well with the 20-packs of little cigars. At its stores in larger cities and towns and around a college campus, flavored cigars really move. However, in its rural market 44 Convenience Store Decisions June 2018

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areas, natural leaf and “old-fashioned non-ﬂavored varieties” sell.

PROMOTING PRODUCT With the pricing right on the package the product promotes itself, said Carl Hitt, Jr., director of operations at Wi-Not Stop, which has 12 stores in northern Virginia. “We don’t do any additional promotion for cigars because, although the profit margin is better than for cigarettes, it’s not enough to merit special promotions,” said Hitt. “We carry them mostly for the convenience of the customers and because it brings them into our stores.” At the Big Apple Food Stores, which counts 76 locations in Maine and New Hampshire, little cigar promotions are rarer, but the retailer does pass along any temporary price reductions that are offered by the manufacturers, said category manager Brandi Cushman. Big Apple’s sales of two-for pouches are increasing while packs are decreasing slightly. She added that limited time offer (LTO) ﬂavor additions to the lines of pouches usually create excitement among c-store consumers. There is no shortage of new ﬂavors, however. Although the new flavors

Fast Facts: » Prepriced pouches are picking up momentum. » Limited time ﬂavors keep curious consumers coming back. » States and municipalities are pondering more restrictions and tax hikes on cigar products.

don’t necessarily attract new customers to the category, it keeps existing ones coming back more often to see and try something different. But the deluge of new products can be overwhelming for retailers that don’t have the time, manpower and back-ofﬁce system to efﬁciently track sales in all their stores. “At MinitMart, we are able to go through store by store to see where the growth and decline are rather than saying a blanket yes or no on any new product,” said Hoffman. “The more information you have, the better you cstoredecisions.com

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Category Management

Cigars

CIGAR SALES UP In the other tobacco products category, dollar sales and unit sales of cigars in c-stores have performed strongly thus far in 2018. Product

$ Sales

$ Sales % Chg YAgo

Cigars

$3.26 B

13.29%

Unit Sales 2.257 B

Unit Sales % Chg YAgo 13.21%

tion these cigars are getting from state and municipal lawmakers. In Maine, for example, Cushman said the latest mandate is a ban on all flavors except on natural leaf cigars.

LEGISLATIVE HEADWINDS

The Cigar Association of America recently reported that in New York, Source: IRI Total U.S. Convenience Store All Scan data for the 52 weeks ending March 25, 2018 Assembly Bill 277 would prohibit the sale of flavored tobacco products, except for menthol, mint and winterWhile many retailers display their green flavored products. can target and keep up with what concigars behind the front checkout counOn the local front, legislation has sumers want.” All three retailers are optimistic that ter, MinitMart puts them inline or on been introduced in Philadelphia that little cigar sales will continue to grow stand-alone racks so that customers would place restrictions on the sale of this year. MinitMart has taken a major can pick up the products and look at flavored tobacco products, except for menthol. step to make sure that happens by them. “They’re more likely to try somePackage size is at the crux of propartnering with a new loyalty program with a tobacco company that offers thing new if they can get a good look posed legislation in Rhode Island. consumers savings the more they pur- at the package,” Hoffman said. “It’s The ever-popular two- and three-fers like shopping at a shoe store.” would be endangered should House chase their favorite cigars. The downside of flavors fueling Bill 7976, requiring little cigars to be “We expect this to be huge for us,” the category’s growth is in the atten- sold only in packs of 20, is passed. said Hoffman.

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Also in Rhode Island, Gov. Gina Raimondo is calling for a 30-cent per cigar increase to the state’s current rate. Currently, Rhode Island has a tax rate on cigars of 80% of the wholesale price, but it is capped at 50 cents per cigar. Raimondo would like to raise that cap to 80 cents. State legislatures are also considering raising taxes on little cigars. According to the National Association of Tobacco Outlets (NATO), New Jersey’s governor is proposing a tax increase for cigarillos (at 54 cents) and little cigars (at $0.135). And 22 states are considering whether to restrict consumers under the age of 21 from purchasing tobacco products. In Maine, where Big Apple has stores, the minimum age to purchase will be 21, effective in July, Cushman said. However, the state is grandfathering in consumers who turn 18 as of June 30, 2018.

tion at the state level and is a top agenda item for anti-tobacco interest groups,” the organization wrote in its By the end of 2025, the global marMay 14 weekly report. ket for cigars and cigarillos is estiOne example is a March 2018 mated to exceed $23 billion revenue. decision from Hawaii committee members who endorsed Senate Bill 2843 Products Sales SD1, which includes amendments Cigarillos $19 B to increase the annual license fee for tobacco wholesalers and dealers from Flavored $9 B $2.50 per year to $500 per year. Persistence Market Research April 2018 The measure also raises the tax on cigarettes and little cigars from 16 cents per cigarette or little cigar to 22.5 cents each, or $3.20 per pack to Instead, Cushman expects that $4.50 per pack. Lastly, New Mexico State Sen. the new law will have some negative impact on little cigars, but the grandfa- Howie Morales earlier this year filed thering in of some 18-year-olds should Senate Bill 25 that would raise the state’s cigarette tax by $1.50 per soften the blow a bit. The Cigar Association of America pack and impose an equivalent tax expects to see continued introduc- on other tobacco products including cigars, smokeless tobacco and elections of age restriction bills. “This issue is getting a lot of atten- tronic cigarettes. CSD

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March 2018 Convenience Store Decisions 47

5/24/18 5:20 PM

Category Management

Smokeless

More Consumers

Smokeless Slow but steady describes the growth in sales of snuff, snus and moist chew. By Marilyn Odesser-Torpey, Associate Editor

n its recent State of the Industry and preferred vendor programs for the report, the National Association of company. While Roccagli doesn’t see Convenience Stores (NACS) ranked massive growth going forward for the other tobacco products (OTP) No. subcategory, he does point out that 4 among its top 10 c-store merchandise sales are up and predicts they will concategories, trailing only cigarettes, pack- tinue to steadily increase, probably another 1-2% this year and beyond. aged beverages and beer. Empire Petroleum has 1,600 partAccording to Infoscan Reviews, Total U.S. Convenience for the latest ner stores to which it supplies fuel in 52 weeks ending March 25, 2018 pub- 30 states. The company also owns and lished by Information Resources Inc. operates 74 stores in eight states. The partner stores report that moist (IRI), a Chicago-based market research ﬁrm, the smokeless OTP segment is an tobacco users are a loyal group of consumers. over $7.5 billion business. “They come in every morning for Sales in the category, which includes snuff, snus and moist chew, their smokeless chew just as they have increased by 7.6% over last year. would for cigarettes,” said Roccagli. Unit sales have grown by close to “A lot of store owners and people 1.4%. Chewing tobacco and snuff sales behind the cash registers know what alone total almost $6.7 billion. Dollar brands, like Royal Copenhagen and and unit sales for this sub-category Skoal, they have to always keep on hand for these regulars.” have been relatively ﬂat. Spitless tobacco (or snus) is close to a $348 million subset of OTP. That FRESH ALTERNATIVES represents a 20.85% increase in dollar With smokeless chew, store owners sales over last year and an 11.50% rise must keep a sharp eye on the freshin unit sales. ness date stamped on the packages. Moist chew does particularly well “If the date (on smokeless chew) is in the stores partnered with Dallas- past its freshness date even once, you based Empire Petroleum Partners, said could lose the customer to another Ted Roccagli, director of partnerships store,” Roccagli said. 48 Convenience Store Decisions June 2018

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Fast Facts: » Other tobacco products are the fourth largest category for convenience stores. » Consumers are brand loyal and date sensitive. » Dollar stores are competing for smokeless business.

In addition to the traditional favorites, the stores usually feature limited time offer flavors provided by the manufacturers. “Manufacturers come into the stores routinely to put up racks and/ or signage behind the checkout counter,” said Roccagli. “Personally, I think the manufacturers come out with just enough ﬂavors to keep the category interesting without overwhelming it.” Roccagli said moist chew has a wide-ranging fan base in terms of age, ranging from 18-year-olds to seniors. Referring to an MSA research report cstoredecisions.com

5/24/18 5:21 PM

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Category Management

Smokeless

“

If the date (on smokeless chew) is past its freshness date even once, you could lose the customer to another store.

”

- Ted Roccagli, director of partnerships and preferred vendor programs, Empire Petroleum Partners.

on Wholesale Shipments to Retail Cubby’s convenience stores with NAVIGATING LEGISLATION through Dec. 30, 2017, he noted that 36 locations in Nebraska, Iowa and While taxation is always a major dollar stores are amping up the com- South Dakota, agrees with Thomas issue for all tobacco products, most petition with convenience stores when that the avalanche of new products states tax smokeless at a lower rate it comes to selling smokeless tobacco in the smokeless category requires than cigarettes because they perproducts. Shipment of the products to closer management and “at the end ceive the products as lower health risk, convenience stores was up 1.2% last of the day, you end up holding more said Alex Clark, executive director of year, while shipment to dollar stores inventory.” the Consumer Advocates for SmokeTo avoid tying up too much money free Alternatives (CASAA). However, was up 29.9%. For snus, the shipments increased 5.4% to convenience stores in untried inventory, Wilson will nego- the National Association of Tobacco tiate with manufacturers, offering to Outlets (NATO) and 32.9% to dollar stores. Snuff is the OTP sales driver for the take a case of the new flavor to see a n n o u n c e d 58 White Oak Station convenience how sales go. that New “Sometimes manufacturers will do it Jersey’s govstores located in Texas, Arkansas, Missouri, Iowa and Florida, said CEO and sometimes they won’t,” said Wilson. e r n o r h a s Wilson explained that the best-sell- p r o p o s e d a Rodney Thomas, who is seeing growth ing item in the category is moist dip, jump in taxain the category. Although he agrees that new flavors but, overall, sales of OTPs are flat. tion of snuff help to keep consumers interested Wilson expects that trend to continue. from 75 cents Alex Clark Although Wilson will generally par- per ounce to and engaged in the category, Thomas feels that manufacturers go a bit over- ticipate in a promotion created by the $2.25 per ounce. board with new varieties, making the manufacturer, he said that 50-cents off Iowa’s House Bill 2339 proposes to or coupons don’t move much product. increase taxes on certain OTPs from category a challenge to manage. “If someone comes in to buy his 50% of the wholesale price to 67%. “No matter how many new flavors they introduce, wintergreen remains regular Skoal Long Cut Wintergreen, In Kansas, state HB 2768 seeks to he’s going to buy it no matter what,” increase the tax on OTPs from 10% to the favorite,” he said. De Lone Wilson, president of Wilson said. 60% of the wholesale price. Moreover, a New York Assembly Bill would allow a city of one million or more to tax tobacco, other than cigarettes, at a rate not to exceed 10% of the purchase price. Through June 18, the Food and Drug Administration (FDA) is invitIn an advance notice of proposed ing public comment on an application submitted by R.J. Reynolds Co. rulemaking, the U.S. Food and Drug to classify six of the company’s Camel Snus varieties as modified risk Administration (FDA) is calling for tobacco products, said Alex Clark, executive director for the Consumcomments, data, research results and er Advocates for Smoke-free Alternatives Association (CASAA). other information to help determine if “If [this designation] is granted, Reynolds could market the prodflavors attract youth to initiate tobacco ucts to consumers as lower health risk than cigarettes,” Clark said. product use and how they may help CASSA urges members and the public to post their comments on adult cigarette smokers reduce cigthe application at www.regulations.gov. Clark added that retailers arette use and switch to potentially should talk to their customers about posting comments as well. Deadless harmful products. Comments can line for all comments is June 18. be sent to www.regulations.gov. The deadline for posting is June 19. CSD

Have Your Say

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5/17/18 9:54 AM

Category Management

RYO

RYO Tobacco Earns

Irreplaceable Status Shifting economic issues and changing regulatory tides can’t extinguish consumers’ fondness for roll your own. By Howard Riell, Associate Editor

Fast Facts: » For the 52-week period ending March 25, 2018, sales of roll-yourown tobacco in the convenience store channel topped $47.8 million, a decrease of 7.57%. » Minnesota, Illinois, Washington and Rhode Island all are considering bills to raise the state’s tobacco buying age to 21. » The U.S. Food and Drug Administration is requiring new warning statements to be included on packaging and advertisements for roll-your-own tobacco, among other products.

oll-your-own (RYO) tobacco REGULATORY PRESSURE remains one of those categoRYO isn’t immune to the legislative ries that doesn’t command a assault being waged against tobacco tremendous amount of retailers’ products in general. Currently, Minnesota, attention—until they run out of stock. Illinois, Washington and Rhode Island RYO’s fortunes have an inverse rela- are considering bills to raise the state’s tionship with the economy: when times tobacco buying age to 21. More than half are rocky, consumers look to save money of New York State residents live in areas by opting for RYO instead of cigarettes. where they need to be 21 years old in When economic times improve, and cig- order to buy tobacco products. California, arette sales rebound, RYO sales can slide. Maine, Hawaii, New Jersey and Oregon For the 52-week period ending all have 21 as the minimum tobacco buyMarch 25, 2018, sales of roll-your-own ing and using age, according to NACS. tobacco in the convenience store chanIn addition, the National Association nel topped $47.8 million, a decrease of Tobacco Ou tl e ts (NAT O ) has of 7.57%, according to the Information reported that the U.S. Food and Drug Resources Inc. (IRI), a Chicago-based Administration is requiring new warning market research ﬁrm. statements to be included on packagDon Burke, senior vice president ing and advertisements for roll-your-own of information management solutions tobacco, as well as for cigarette tobacco, for Management Science Associates in pipe tobacco, electronic cigarettes, vapor Pittsburgh cited wholesale shipment- products, hookah tobacco and cigars. to-retail data near the end of 2017 that shows roll-your-own tobacco accounted SHOWCASE STRATEGY for 0.4% of total nicotine share, up 1.3% For those c-store operators whose over a year ago. sales warrant it, David Kraning, pres“Regular cigarettes, on the other ident of the ﬁve-unit K&B Kwik Stop in hand, saw sales drop by 3.7%,” Burke Pocatello, Idaho, usually advises focussaid. “During the same period, 51% of ing on merchandising and promotions. “I RYO volume came from the convenience would try to showcase it, try to bring in a store/gas channel.” lot of different varieties and SKU’s, and

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Category Management

RYO

own tobacco is up,” said Greene. “It’s kind of balancing the other two states.” Greene reported that he has seen a clear consumer trend toward larger sizes of RYO tobacco. His stores’ 16- and sixounce packages are up slightly, while smaller three- and four-ounce sizes are down slightly. “That is why the units are down,” Greene said. “But there is definitely a correlation between where cigarettes are up and vapor has really taken off, and roll your own is down, and vice versa.” While trends continue to show interest in tobacco products other than traditional cigarettes, consumer interest is diversifying. “Tobacco in general is definitely going toward the alternative products,” Greene noted, “with vapor leading the way. All the majors are coming out with their new devices and they are discounting the hell out of them. They are really pushing the vapor category. You are seeing more and more innovation with brands like ZYN, the nicotine pouches. Also gums, although we are not seeing a lot of success with those.” While RYO comes along with several ancillary prodNICE AND STEADY “In my experience (the roll-your-own tobacco category) is ucts, such as tubes, filters, injectors, papers and rolling mostly unchanged over the last several years,” noted Tim machines, Greene said he does not feel their impact on Greene, category director of tobacco and general manager sales is significant enough to change retailers’ thinking for Boulder, Colo.-based Cigarette Store Corp., which owns about the category’s role in their stores. “I don’t know if Smoker Friendly. “It’s kind of a flat category. I mean, it’s a they are going to be impressed with that. We sell a ton of strong category, but it’s just been uneventful and steady, so tubes, obviously, and some injectors and everything else. there hasn’t been a whole lot of change in my experience in But really, where you are going to make your money is on our stores. It’s kind of a steady Betty, and it just keeps rolling.” the actual roll-your-own tobacco.” Greene said he routinely declines to offer advice to Smoker Friendly operates 104 stores, including 20 Gasamat convenience stores that offer fuel. The chain’s sales convenience store operators, other than for them to compare SKUs’ sales figures. “I think that they need to look at of roll your own are up slightly, about 1.5%, Greene said. “I can tell you this: we operate in five states, and in the it closely. If their cigarettes are down that’s an opportunity, two states where our cigarettes are up and vapor is killing because the shopper is going to be looking for that alterit, in particular JUUL, we are down in RYO,” said Greene. native product.” Another tactic that convenience store operators can try “Sales there are down by probably 5% or 6%. What it tells me is that people are transitioning to vapor or, since the to move more roll-your-own tobacco is talking to consumers economy is good, they are buying cigarettes. So yes, we about sustainability, a hot topic at retail. For instance, one major RYO brand, Zen, references ‘earth-friendly materials’ are seeing (that correlation) is true.” Research backs up what Smoker Friendly is seeing in that have been ‘responsibly sourced high-quality materials vapor. IRI has reported that for the same 52-week period in our production processes.’ CSD ending March 25, 2018, electronic smoking device sales in the convenience store channel jumped 49.47%, to nearly $1.3 billion. “In a state in which cigarettes are down and maybe JUUL hasn’t taken off like it has in Colorado and Florida, roll-yourget your place to be known as the place to go if that’s what you’re looking for.” Kraning said that the question of whether RYO sales suffer when the economy is doing well is not one that concerns him. “We really don’t do a whole lot with roll your own, so I don’t have an opinion either way. We carry one SKU in our store, and that’s it.” At the same time, however, Kraning knows that as a retailer he must remain responsive to his customers, which means he is open to expanding his RYO category, if warranted. “If there was a huge demand for it, we probably would,” said Kraning. We have some customers here who tell us that they like to have it around, but other than that we stick mostly with the combustibles and e-cigs and things like that.” Those shoppers who do ask for roll-your-own products tend to be older, Kraning pointed out. “You could probably get by without it, but like I said, we listen to our customers,” he said. “When we had customers who are our regulars and request the product we tried to bring it in for them.”

51% of RYO volume last year came

from the convenience store /gas channel. 56 Convenience Store Decisions June 2018

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Category Management

Tobacco Accessories

Acclaim for

Tobacco Accessories Lighters still lead the accessories category, but options such as vaping items are growing popular. By Jeffrey Steele, Contributing Editor

obacco accessories, whether know will be successful,” said Forcey. it’s lighters, papers, cartridges “We primarily carry BIC lighters, and or other products, are essential also an assortment of the Zippo convenience store inclusions lighters.” A few years ago, the c-store chain that help stores tally additional incorporated its own line of lighters. basket rings. “Our Busy Bee-logo lighters are Of these products, lighters are a particularly key impulse item often very popular, and many of our cuspurchased by smokers. Generally kept tomers will pick up these on their way near the register to spur spontaneous through. However, BIC is our best-sellpurchasing, the colorful appearance ing lighter by far. Lighters with images of these merchandise items and wide depicted [on their sides] always seem variety of price ranges can induce cus- to do really well too.” Forcey believes the Busy Beetomers to spend a little more. Sales of tobacco accessories in con- branded lighters’ popularity has much venience stores topped $265 million in to do with their low price points and the 52 weeks ending March 25, 2018, a what she termed “the whimsy of our 2.52% increase over last year, accord- branding,” built around fun and meming to scan data from Information orable taglines like “The Hive That’s Resources Inc. (IRI), a Chicago-based Worth the Drive,” and “Clean Potties, market research ﬁrm. Unit sales rose It’s Our Beeswax.” When it comes to merchandising slightly, to more than 150 million. Newer accessories that are garner- tobacco accessories, Busy Bee stays ing attention in the channel include with its contract regulations by utilizing herbal wraps and organic rolling papers. behind-the-counter displays, “which work great for our company,” Forcey said. “Attention can be drawn to these ALL ABUZZ Busy Bee, the Madison, Fla.-based displays, with various signs and offers chain of some 18 stores in Florida and that can occasionally sway a guest’s Georgia, where the tagline is “Thriving purchasing decision.” The stores feature a rotating display in the Hive,” has found steady success among patrons who know what they of BIC lighters, ranging in price and design, making the item appealing to want. Megan Forcey, director of adver- a wide variety of budgets and tastes. “Being able to provide our guests tising and e-commerce at Busy Bee, said the busy retailer is somewhat tra- a variety of options is not only essenditional when it comes to tobacco tial but fun for the guests as well,” said accessories. Busy Bee is part of Forcey. “Between these options [including] the lower-cost Busy Bee lighter and Johnson & Johnson Inc. “We just stick to the basics that we the Zippo lighters, we have an option 58 Convenience Store Decisions June 2018

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that will meet everyone’s needs.” Sales of cigars, cigarettes and other tobacco products help spur accessory sales at Busy Bee, Forcey said. “We see customers come in to buy cigarettes, and we have worked with our team to prompt the guest to add a lighter to their sale.” Other c-stores are seeing success with bigger lighters—more specifically, lighters with more butane that produce stronger flames. As the strong-selling cigar segment continues to grow, cigar smokers appear to be gravitating toward quick lighting, butane lighters. Other ancillary accessories can be found in ash trays and humidors or papers for roll-yourown cigarettes.

EMERGING VAPE Within the comparatively new e-cigarette and vaping categories, refillable pod devices have become increasingly popular with those who enjoy vaping. With new vape brands inundating the c-store channel, pod replacement cartridges are a big favorite with a growing number of U.S. consumers. In addition, coils, batteries and USB cables are becoming more popular. Even the demand for silicone mats is on the rise. Such mats allow users to place parts of the device when filling it with e-juice or cleaning it. Though Busy Bee convenience stores have not added vaping accessories, Forcey said, “We have seen an increased interest in the flavored vaping products.” CSD cstoredecisions.com

5/24/18 5:21 PM

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5/18/18 10:41 AM

Foodservice

Pizza

American Pie New options in pizza offerings continue to satisfy the nation’s need for delicious tastes and mealtime convenience. By Pat Pape, Contributing Editor

Fast Facts: » A report from Mintel, the consumer research group, predicted total pizza sales will mushroom 11% between 2016 and 2021 to $5.7 billion in sales. » Twenty-ﬁve percent of consumers aged 18-24 have purchased a pizza from a c-store in the last three months. » Not surprisingly, toppings remain a top draw for pizza lovers, whether it’s traditional offerings such as pepperoni or more exotic toppings.

recent poll conducted by pings are veggies,” said Ryan Krebs, CiCi’s Pizza indicates the aver- director of foodservice for Rutter’s. age American will chow down “Even with the vast array of proteins we on approximately 6,000 slices have—aside from the almighty pepperoni and sausage—green peppers and of pizza in his or her lifetime. While 85% of survey respondents said black olives are right behind those.” Of course, pizza is still an indulthey eat pizza because they like the taste, 47% agreed the critical factor of conve- gent, comfort food for most consumers, nience makes ready-to-eat pies especially and recognizing that, Rutter’s includes regional protein favorites, including fried attractive. To keep up with competitors, conve- balogna and pork belly, in the chain’s nience stores are adopting many pizza toppings menu. As a line extension, Rutter’s recently restaurant trends, and customers are responding positively. A report from introduced Roni Rolls made from soft, Mintel, the consumer research group, Italian dough and stuffed with pepperoni predicted total pizza sales will mushroom and mozzarella. 11% between 2016 and 2021 to $5.7 billion in sales. Moreover, 25% of consumers NATURAL CRUST aged 18-24 say they’ve purchased a pizza Approximately one in 100 Americans from a c-store in the last three months. suffers from Celiac disease, an autoimmune disorder caused by gluten intolerance. This includes several memTOP HEAVY At Rutter’s stores, based in York, Pa., bers of Larry Jackson’s family. Jackson, owner of Good to Go pizza is a priority. Customers can choose from over 50 toppings for their custom Markets, which includes the Bullhead Pit pizza but only pay extra for protein addi- Beef food truck in Columbia, Md., wants tions. Sauces and veggies are added to his relatives to enjoy food at his newthe pie at no extra charge. As one may est convenience store location, so he’s expect, pepperoni and sausage are the searching for a non-traditional, healthier crust for his pizza program. two leading toppings, respectively. “I started exploring options thinking “But our No. 3 and No. 4 chosen top-

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Foodservice

Pizza

that if we could do a gluten-free crust outlets. Currently, the nation’s largest ORDER AND DELIVERY that was as good as a regular crust, I brand of made-to-order c-store pizza, PMQ’s 2018 Pizza Industry Census would be able to serve something that Hunt Brothers is sold in more than reports that 58% of pizza restaurant people who don’t usually eat gluten- 7,500 locations across 28 states. The operators currently offer online orderfree would appreciate,” Jackson said. program features any combination of ing and some credit as much as 15% of “We’ve tried several options so far, and 10 toppings, all of them at no extra their sales to this added convenience. I’ve made dozens of varieties of crust charge, and introduces limited time EMarketer, a research company starting with a traditional flour recipe offerings several times a year. that follows digital marketing trends, “Hunt Brothers’ training has always recently reported 69% of internet that I like and substituting different options, including chickpea flour, soy- been pretty tight,” said Anita Bichsel, users have ordered food delivery based flour, cornmeal and coconut marketing manager for Break Time. online within the past year. “We have a foodservice and developflour combined with tapioca.” Ankeny, Iowa-based Casey’s ment manager who serves as a liaison General Stores began serving pizza in between Hunt Brothers and our stores. 1984, and today, it’s one of the comWELL-TRAINED TEAM Comprehensive training of all in- When we open a new store, Hunt pany’s signature fresh food items. store pizza-makers is important. If team Brothers comes on site with their peo- Customers can order the chain’s mademembers are educated in safe food- ple to train our staff. As our employees from-scratch pies online, and in some handling practices, follow all food learn the program, we sample pizza to areas, purchase oven-ready flatbread pizza that can be baked at home. safety codes and work to avoid waste, customers.” To keep best practices top of mind, According to Mintel, convenience they will produce a better product and a training video from Hunt Brothers stores are increasingly offering better save their employer time and money. Break Time convenience stores is posted on the Break Time intranet quality pizza, complete with a wider with 73 locations in Missouri relies on site for employees to review whenever range of flavors and sizes, plus more topping offers. CSD the Hunt Brothers Pizza program in 21 necessary.

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5/18/18 10:29 AM

Foodservice

Chicken & Roller Grill

Quick Foods

Magnify C-Store Menus

Retailers ﬁnd that supple chicken and roller grill programs can beef up foodservice offerings. By Howard Riell, Associate Editor

There is also more chicken around mericans’ love affair with chicken shows no signs of slowing today. According to the U.S. Department down. Always a versatile ingre- of Agriculture, beef production has held dient, it appeals to a wide range steady since 1970, while chicken producof customers and is perceived as healthier tion has increased by five times. Those increases have brought improvements in than other proteins. Throw in the fact that roller grill offer- production efficiency. Not only is chicken a healthier proings have become more diverse, and the canvas for convenience retailers to stretch tein option, but can be used in variety of their foodservice programs is wide indeed. offerings, cutting foodservice costs subChicken is a flexible protein, and is find- stantially. It’s little wonder, then, that across ing its way into almost every aspect of the c-store channel, chicken is flying out the foodservice. In addition to the traditional door of retailers big and small, including: • 7-Eleven is offering eight bone-in chicken sandwich lunch and dinner entrees and roller grill finger foods, or appetizers wings for just $5. Other chicken menu like chicken tenders and nuggets, c-stores items include grilled and classic chicken are adding chicken to their breakfast sandwiches; chicken tenders; spicy chicken sandwiches and biscuits; and Monterey menus as a biscuit sandwich protein. Retailers are also using chicken as a Jack and Buffalo Chicken Taquitos. • Wawa is serving a Roasted Chicken pizza topping, expanding their varieties of chicken-based wraps, putting it salads, Sandwich with melted provolone, and and placing chicken-based sausages on fresh veggies; quesadillas and burritos the roller grill. The use of chicken breast available with chicken or beef; chicken in breakfast sandwiches has risen consider- caesar salads; and chicken noodle soup. • Sheetz also uses chicken in a variety ably, driven largely by younger consumers. It has a prominent place in a wide variety of ways, including made-to-order Mac of food, including pizza, Mexican, Asian N Cheese with chicken tenders; Grilled, Popcorn and Spicy Chicken; a Boom and Korean dishes. Chicken is also a good way to provide Boom Chicken Po’ Boy; grilled chicken menu items that have a better-for-you sub; Chicken Sala; and Chicken Shnack image without sacrificing flavor and Wraps, Stripz and Sliderz. satisfaction. 64 Convenience Store Decisions June 2018

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Fast Facts: » According to the USDA, U.S. beef production has held steady since 1970, while chicken production has increased by ﬁve times. » Per-capita U.S. beef consumption peaked in the 1970s and has since dropped by about one-third. » Over the same period, consumption of chicken more than doubled.

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5/22/18 1:30 PM

Foodservice

Chicken & Roller Grill

Roller grills, like this one featured in this Seasons Corner Market in Massachusetts, remain a stalwart of c-store foodservice programs.

dark meat, $16.99 for white and $19.99 for a mixed box. The entrée comes with French fries and a roll. Occasional promotions with either Coke or Pepsi offer discounts on two-liter bottles with the purchase of a 25-piece meal. Tenders come in six- and nine-piece sizes. Meat pies are priced at $2.29, and the Jambalaya rice side dish at $1.59. The stores’ deli areas are manned around the clock by a team of two or three employees. Washington said Brother’s management team currently INTEGRATING ROLLER GRILL A great mix: “Chicken is a very popular choice for Q has no desire to expand its chicken offerings. “We just plan Mart,” said Mary Sonatore, retail buyer and merchandiser to keep everything the same.” Nor do they feel that adverfor Northwest Petroleum LP’s Q Mart, a Houston-based tising their largely chicken-based foodservice program is chain of 26 convenience stores across Houston and Austin, necessary, preferring to rely on word of mouth. “We have a lot of locations,” Washington said. “They are Texas. “For c-stores overall, we’ve seen a great mix that’s included in items such as bowls, wraps and sandwiches, clean and located close together. A lot of people pass by and recognize us. We sell fuel also, so it’s a one-stop shop and tornados and egg rolls on the roller grill.” Sonatore said the c-store chain is extending its menu for customers.” That word of mouth recently extended to comedian profile to accommodate chicken’s popularity. “Chicken has great options for stores to diversify their and actor Kevin Hart, who had good things to say about menus, and we’ve certainly taken advantage of that. For Brother’s fried chicken on Twitter. example, at Q Mart we have several items containing chicken in choices such as plates, fajitas, salads and tacos. SIMPLER OPTIONS Since we are based in the Southwest, we include chicken Tariq Khan, the president Sentar Fuel Co. in West in items that consumers from our region are attracted to.” Hempstead, N.Y., which operates a trio of BP Express conTo augment her menu even more, Sonatore is offering venience stores, said he does well with sales of chicken roller grill items, including a robust hot dog program. items and grilled items through a franchised Nathan’s Famous outlet in one of his locations. “We have an oven that we use to prepare chicken nuggets, as well as a deep OH BROTHER New Orleans-based Brother’s Food Mart, which oper- fryer that we use for both chicken and French fries.” Do c-stores benefit from chicken’s healthy perception? “Yes ates 40 store locations, is enjoying great success with its fried chicken program, said CEO and owner Eddie Hamdan. and no,” said Khan, depending on what patrons prefer. Sentar runs no promotions on its chicken dishes, Khan “This is New Orleans. We are known for it. We all love it in noted. “We just put out our signage.” New Orleans, Metairie, Baton Rouge—everywhere.” The company also serves chicken Panettas, priced at 99 Brother’s general manager Lisa Washington pointed out that her company’s fried chicken program also helps estab- cents each. Khan said he believes convenience stores should place lish its brand, since it uses well-known proprietary breading and marinade. “We want to be distinct.” Brother’s menu more chicken items on their menus. “Americans are eating also includes Po Boy sandwiches, meat pies and Jambalaya more chicken without a doubt, because people today are rice. The combination works: foodservice accounts for 35% very health conscious. They also feel that chicken is something that is not like fish, and they don’t like French fries of store sales, Washington said. Brother’s fried chicken program includes sizes ranging that much. The guys, who are watching their diets, they will from two to 25 pieces. The top size is priced at $14.99 for go with chicken.” CSD 66 Convenience Store Decisions June 2018

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5/25/18 1:24 PM

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5/17/18 10:13 AM 2/20/18 5:47 PM

Technology

Column

What Is the Value of API? Moving to API will cause disruption, but information sharing can open doors to opportunity. By Erin Del Conte, Senior Editor

oday, it’s hard to take two steps without hearing about API (application programming interface), but what is it and why is it important for c-store retailers? API is “the way for a machine to talk to another machine,” said Jason Lobel, CEO & co-founder of SwiftIQ, an analytics solutions provider, who spoke on API at the NACS State of the Industry conference this past April. In other words, API is a connection. As Daniel Burrus, technology futurist and best-selling author of seven books, told me, “we have islands of information at companies and that makes a disconnected world. Part of the disconnection is the competitive advantage in keeping the data to yourself, building a strong brick wall around it, making it secure and making sure others can’t access your data. Increasingly, if you want to increase the power of software and applications for people you need greater access.”

INFORMATION CONNECTION To understand API, just think of Amazon, which allows third parties to connect to Alexa, its multi-billion dollar super computer, using an API. “You can access Alexa and plug your data into it using an API, so you can serve your customers with your data using that special connection that’s not tied to hardware,” Burrus said. Companies can also take the software, API and chip set and put it in their own type of Alexa. For example, a company that makes smart thermostats could use this API to allow people to say “thermostat, increase the temperature two degrees,” and it will. Lobel noted Extensible Markup Language (XML) used in the c-store industry is one language with which to read something from a machine. However, APIs allow you to expose data in a variety of different types of languages. “It’s like a Rosetta Stone,” he said. APIs allow data to be accessed from a system without actually having to pull it out of the system and store it on your own system. The cloud not only allows us to process data anywhere but also to access data quickly from anywhere because of the APIs built in. While you could send somebody XML and allow them to read it, APIs don’t have to be read only, Lobel explained. Information can be transferred back and forth. Think of 68 Convenience Store Decisions June 2018

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how APIs are used to allow Google Maps to be accessed by Uber and iPhone. If I’m waiting for my Uber and move to a new location, that data automatically transfers to the Uber driver through an API. Moving to a more sharing-based API system will cause disruption for legacy providers of everything from loyalty to point-of-sale systems. Burrus encourages operators and providers alike to ask, “Is protecting and defending in a proprietary system keeping you from making money and growing faster?” “The old way to have power was by keeping things to ourselves. Today, we’re not gaining power by hoarding, but by sharing,” Burrus added. He pointed to Apple and Sony, which formed an alliance in the 1990s so Apple could learn to make better laptops and Sony could make more userfriendly software. It allowed both to thrive. By contrast, “defending didn’t work for Blackberry and Kodak.” Sharing through APIs doesn’t mean giving away access to everything, but partitioning and giving access selectively. “I give you access to the data that would make our relationship helpful, but not to proprietary information,” Burrus explained. SKY’S THE LIMIT Today, some stores auto purchase items when they are running low, but that system isn’t open. APIs could take that to the next level, connecting the warehouse, supply chain, delivery drivers, allowing instant ordering, showing the retailer the transit map and delivery time—in other words, creating a speedy, seamless experience. Burrus noted many cities are creating open API connections to all city data. You can develop apps that tie into the data, making use of bus routes, airports, populations, the economy. C-store apps could offer customers this added value for traversing the city when away from the store, so they use the apps more often and then return to the store. It could also be used to aid cyber security. “Imagine if all c-store operators in the world shared when there was a cyber breach and what happened so all stores could learn and take anticipatory instead of reactionary steps,” said Burrus. “The more we keep to ourselves the more we have problems because we aren’t learning.”

cstoredecisions.com

5/25/18 12:40 PM

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5/25/18 6:18 AM

Operations

Loyalty

Connecting Through Loyalty When it comes to loyalty programs, customers are seeking interactions with the retail brand and offerings that are relevant. By Brad Perkins, Contributing Editor

t is often easier to entice existing tomer segments, each with their own customers to buy more than to gain identities, buying habits and lifestyles. new customers. But studies have And they are willing to provide retailers shown that many satisfied custom- with relevant information on themselves, ers do not return to a store in which they if they get something in return.” Loyalty today involves more than an had good service. The 2018 Maritz Wise Marketer Loyalty occasional fuel discount or free cup of Landscape study showed that 68% of coffee. Customers want interactions with those surveyed were transient loyalists– the brand and offers that are personally those who are loyal, but also able to be relevant. “It varies by customer as to why they convinced to shop elsewhere. “Customer loyalty is really about con- are loyal or not loyal to a store, and it’s nection and experience,” said Lesley important for retailers to understand Saitta, CEO of Impact21. “How con- their customers and decide who they nected does a customer feel with a brand want to attract and how best to do so,” or a store and what is the experience Saitta said. That’s why Yesway incorporated storethey get when they shop there?” level elements to its Yesway Rewards program as it rolled out last year. CONNECTING MORE “Our philosophy on loyalty is that loyBuilding connections can be difficult in convenience, where customers often differ- alty has to be earned at the store level,” entiate retail platforms based on location, said Darrin Samaha, vice president and how much a gallon of gas costs at a par- brand manager at Yesway, which operticular time or a deal on a 32-ounce soda. ates 86 stores in Iowa, Kansas, Missouri, All of those offerings can provide different Oklahoma and Texas. “They can turn right or left, and we want them to turn opportunities for store loyalty. “A one-size-fits-all loyalty program is a into our lot.” Success has come by tying the Yesway thing of the past,” Saitta said. “As more retailers are analyzing their customer Rewards program, which turns points for data, they are finding many different cus- dollars spent in-store or gallons of gas

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Fast Facts: » Customer loyalty is about connection and experience. » One-size-ﬁts-all loyalty programs are passe. Today’s customers are demanding a personalized program and are willing to share their data to get it. » Social media plays a key role in creating brand loyalty.

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5/17/18 9:47 AM

Operations

Loyalty

On average, Americans belong to

nine loyalty programs.

pumped into smiles that can be redeemed for anything in the rewards catalog, to its brand identity. “Our brand is fun and friendly. That’s part of our currency. It’s the Yesway smile,” Samaha said. That smile appears on its cards and advertising. Like Yesway, Kum & Go incorporated part of its logo into its ‘&Rewards’ program, which launched in 2016. That brand identity has helped drive a successful program in which more than 25% of members use the rewards card with each purchase. “Our &Rewards loyalty program is our primary vehicle to drive loyalty among our customers,” said Kristie Bell, communications direct at Kum & Go. “We want to reward folks who shop with us regularly and entice those occasional shoppers to make us a regular stop.” The program rewards everyday purchases with points and includes daily offers for repeat purchases. “After a customer earns 250 points, he or she is rewarded with one of six rewards of their choosing,” Bell said. Kum & Go also offers a debit card option for its loyalty card, which Yesway is currently piloting as part of its Yespay program. Kum & Go’s program also drives data capture to encourage special offers Capturing and analyzing data is vital to a program. Yesway partnered with Paytronix to capture the data for its programs, deliver email campaigns and review performance metrics. “Our key metrics we look at monthly are penetration rate, conversions, registration rate, activations and visits,” Samaha said. “That’s the core data to our reporting package. Over time we’ll get more granular, especially with our segmentation capability as it relates to the demographics.” The partnership also allows Yesway to do A/B testing, sending the same offer in two different ways and seeing which one works better.

GETTING SOCIAL Testing, offers and data are important to knowing what to offer customers. But it is only one piece of a successful loyalty program. The other half is interaction, both in-person and online. “Many customers refer to the store they shop as ‘My’ [store], and that’s the ultimate in customer loyalty,” Saitta said. “They are known to the store personnel or the experience they get makes it feel like it caters to them because the products they want are there and they have a loyalty card that gives them special promotions.” Yesway uses its store associates to sell the program, 72 Convenience Store Decisions June 2018

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giving them in-depth training and a monthlong soft launch of the program before rolling it out in stores so they are aware of all the benefits and able to encourage enrollment and use of the card or app. It also sends out a street team to each new store opening to get customers signed up for the program. By engaging at the store level, they can connect with patrons. “The biggest change in loyalty is that customers are expecting personalization and relevancy,” Saitta said. “They don’t want to be treated like everyone else, even other members in a loyalty program or club. They want to be given messages, content and rewards that are unique to their buying habits and feel like the retailer understands who they are, what they want and when they want it.” Yesway uses email to achieve this, targeting it to customer behavior, like birthdays or purchases. It even has “lapsed campaigns,” such as a recent one that told customers who hadn’t purchased anything with the card in a while, “We miss your smiling face”. “We try to be clever in a way that’s honest to our brand with the messaging,” Samaha said. Social media also plays a key role in developing brand loyalty, giving companies like Yesway and Kum & Go the ability to develop followings. “We use social media to engage with our customers, often with witty replies to their fun posts about the Kum & Go products they love and talk about on their own social media,” Bell said. “We want to develop a relationship with our customers, so they know they can rely on Kum & Go to always deliver little extras.” Yesway uses social media to build pages for store openings and connect to customers. It’s just another step in making customers their best advocates. “We know what our customers are buying, so we want to try to identify that and give them more of what they want, when they want it, more quickly,” Samaha said. “Because that’s how we’re going to generate buzz about the program and build advocates. Our very best customers will talk about it.” CSD

cstoredecisions.com

5/24/18 5:26 PM

2018

REGISTRATION OPEN

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4/25/18 12:24 PM

/ Products at Work: Cue Vapor Products at Work

Cue Vapor

Several factors make Cue Vapor a top draw among adult tobacco consumers in the c-store channel. By Jeffrey Steele, Contributing Editor

ince e-cigarettes came to market a number of years ago, the e-tobacco category has garnered wide-spread attention from American consumers. According to Vaping.com, there are approximately nine million vape users in the U.S., and more than 20 million across the globe. That translates to more than $3.7 billion per year spent on related products. Among the brands leading the vaping charge is Cue Vapor, which since its introduction in 2016 has seen rapid growth in both distribution and consumer acceptance, much of it coming in convenience stores. Cue’s main tagline is: ‘Satisfaction. At Last.’ which highlights that consumers can ﬁnally stop searching for an e-vapor product which meets their needs. Cue is here to deliver superior satisfaction in a simple and convenient way. HOW IT WORKS The Cue Vapor System delivers subohm vaping performance – which is frequently sought by cigarette smokers who previously tried e-cigarettes or

other complicated e-vapor devices and are now seeking a simple and/or more satisfying alternative. Until Cue, sub-ohm vaping technology had only been accessible to consumers through cumbersome devices sold primarily in vape shops and online. “The formats for these products have traditionally been too complicated for adult cigarette consumers seeking a satisfying alternative,” said Jacopo D’Alessandris, president and CEO for E-Alternative Solutions. “With its revolutionary Click-n-Vape technology, Cue Vapor is vaping made simple with no coils to change or tanks to ﬁll. One just has to insert the desired ﬂavor cartridge in the Cue device, push the button and vape!” MASS MEDIA SUPPORT “We know the vast majority of tobacco consumers smoke cigarettes,” said D’Alessandris. “Many of these consumers are looking for alternatives to cigarette smoking. With ciga-

Fast Facts: » Cue™ Vapor has become one of the fastest-growing e-vapor brands. It is a simple yet satisfying vaping system with tremendous support from a national and regional media campaign and ambitious in-store merchandising. » The Cue Vapor system blends superior satisfaction and sub-ohm technology in an easy-to-use format. » Nashville, Tenn.-based Tri Star Energy, operating as Twice Daily, is among the c-store retail chains beneﬁting from Cue Vapor’s introduction, drawing customers based on the variety of Cue Vapor offerings and crowd-pleasing promotions. 74 Convenience Store Decisions June 2018

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rette sales in volume decreasing consistently year over year by five percent on average, Cue Vapor provides a meaningful alternative to these smokers by providing satisfaction and simplicity without the hassles of more complex sub-ohm vaping products.” “A multi-million-dollar advertising campaign including TV, radio and print is helping Cue build brand awareness and driving those seeking the product to stores,” D’Alessandris added. This campaign is meant to drive national awareness for the brand through infomercials, but also to drive consumers to regional retailers carrying the product. Local TV and radio spots tag specific retailers carrying Cue, and a convenient store locator page on the cuevapor.com website also identifies every retailer currently carrying the product. These tactics make it incredibly simple for adult consumers to find the product when they want it. At retail, first-class merchandising and POS signs capture the attention of adult tobacco consumers. Cue Vapor is sold and distributed by E-Alternative Solutions, LLC, a sister company to Jacksonville-based Swisher International (Swisher), and, thanks to a close relationship between the two companies, it benefits from Swisher’s sophisticated field sales support. In addition, EAS’s experienced and cstoredecisions.com

5/25/18 12:20 PM

professionally-trained sales team supports retailers with category management services, helping ensure the consumer is getting the most from each store’s e-vapor category space. “Cue Vapor’s unique go-to-market strategy has replicated what vapor stores have been doing for years but brought it to a more traditional class of retail and to a mass market audience,” D’Alessandris said. “More specifically, Cue has utilized infomercials as a primary means to educate consumers about vaping and to bring awareness to this revolutionary system. No other tobacco brand has used direct response television in such a way, and with so much investment behind it.” CUE’S SUCCESSFUL PARTNERSHIP WITH TWICE DAILY Among chains benefiting from Cue’s market popularity is Tri Star Energy LLC, which does business

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as Twice Daily. The company has 87 stores, 90 percent within a 50-mile radius of its headquarters in Nashville, Tenn., said company merchandising manager Rick Staley. “Cue offers a lot of variety, and better vapor production than any other product we had in our set,” he said. “Once people try it and find the flavor and nicotine level they like, they come back to buy more cartridges. Cue Vape also provides “plus business” for the stores, expanding the amount of purchases consumers make, he added. “It’s surprising how many other items are sold along with vaping materials, Staley said. “So, Cue Vapor increases the market basket.” As for merchandising, Staley allocates behind the counter eight feet for cigarettes, four feet for moist snuff tobacco, four feet for e-cigarettes and three more feet for cigars. Promotions are touted via off-the-shelf danglers.

“I have a lot of support from Cue on marketing and promotions,” Staley said. “Here in Nashville, we have the Country Music Awards, and EAS is going to set up Cue tents in the parking lot at the store, giving people coupons for $5 off the Cue Vapor System product to incentivize them to try it and drive them into the store.” Consistent with what D’Alessandris calls “the overwhelming early success of Cue,” the partnership with Twice Daily keeps expanding this year. In particular, Twice Daily has just increased its e-Vapor Kit offering adding the Blue and Pink colors. After only a few weeks of sales Staley noted, “I’m very happy with them.”

June 2018 Convenience Store Decisions 75

5/25/18 12:20 PM

PRODUCTShowcase Chilled Snack Bars The PepsiCo-owned Naked brand has launched Naked Fruit, Nut & Veggie Bars, extending the brand beyond premium juices and smoothies for the first time. The all-new line of chilled snack bars is the latest product innovation from Naked. Packed with premium ingredients, including real fruits and vegetables, Naked Fruit, Nut & Veggie Bars offer the convenient nutrition and delicious taste Naked is known for in three flavors: Blue Machine, Green Machine and Red Machine. Naked Fruit, Nut & Veggie Bars contain no preservatives, are Non-GMO Project verified, and are excellent sources of vitamins A, C, E and Iron. Naked Fruit, Nut & Veggie Bars are now available in single- and multi-serve packs in the refrigerated section.

Four Loko Black Four Loko has introduced Four Loko Black, a cryptic name that encourages consumers to determine the latest flavor for themselves. Known for giving their fans the chance to discover and describe new flavors on their own terms, Four Loko Black follows Four Loko Gold as the second mystery flavor in the brand’s Camo can series. The can’s artwork features a black and grey camouflage design with bold, neon green accents. Meant for pre-parties and other celebratory gatherings, Four Loko hopes to encourage a friendly debate among consumers about what the flavor could be. The brand will also be supporting the new product’s launch with several partnerships and events. Four Loko Black is available in 23.5-ounce cans at 14% ABV and has been available nationwide since February.

Company: Phusion Projects LLC www.fourloko.com

Company: PepsiCo www.nakedjuice.com

New JUUL Innovation Rapidly becoming an e-cig category leader, JUUL is the simply satisfying vapor experience designed for adult smokers. JUUL is on the forefront of vapor innovation with its unique satisfaction profile, simple interface and variety of flavors. Unlike standard e-cigarettes, which use free-base nicotine, JUUL uses nicotine salts as found in the tobacco leaf to meet the standards of smokers looking to switch from cigarettes. JUUL Starter Kit comes with everything a smoker who is ready to switch needs: a JUUL device, a USB magnetic charger and a flavor multipack with four different flavors: Cool Mint, Virginia Tobacco, Crème Brûlée and Fruit Medley.

Company: JUUL www.juulvapor.com/retail/wholesale

Eco-Friendly Cups Community Coffee Co.’s Coffee Service Division has moved to new sustainable ThermoLite cups. Made from paper and recycled content, these eco-friendly cups use less material, energy and waste than previous cups. With 109 million cups sold last year, this transition will help further Community Coffee Company’s commitment to sustainability. The company plans to transition to the paper cups by summer 2018. This transition supports the company’s environmental initiatives while providing its customers a quality cup to enjoy its rich, smooth coffee. The Mobius loop logo or recycling logo is clearly visible on each cup to ensure customers are aware they can recycle the product. Additionally, the cup contains 45% recycled material that includes at least 15% post-consumer ﬁber. This information is also printed on each cup.

Company: Community Coffee Co. www.communitycoffee.com

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cstoredecisions.com

5/24/18 5:27 PM

PRODUCTShowcase Peach Flavored Carbonated Water Perrier Carbonated Mineral Water introduces a new product to its expanding selection of flavored carbonated mineral waters: Perrier Peach. The bold and peach-flavored beverage is sugar-free with zero calories and zero sweeteners, presenting a delicious alternative to soft drinks and other sugary beverages. Perrier Peach is the latest addition to the growing range of Perrier flavor offerings, which currently includes Lime, Strawberry, Watermelon, L’Orange and Pink Grapefruit flavors, in addition to unflavored Original. With invigorating bubbles, natural flavors and naturally occurring minerals for taste, Perrier Peach is a wonderful choice to add a twist to your morning or afternoon refresher and is the perfect addition to mocktails or cocktails. Perrier Peach is available in 8.45-fluid- ounce slim cans and 16.9-fluid-ounce PET bottles, ideal for on-the-go consumption. Fridge packs (SRP: $6.95 for 10 8.45-fluid-ounce slim cans) are available at select retailers nationwide.

Company: Perrier www.perrier.com/us/ﬂavors

Sweet & Tart Cigarillos

M&M’S Cookie Sandwiches

A popular taste combination is now available as your favorite cigarillo. Swisher Sweets Limited Edition Swerve cigarillos provide the perfect mixture of sweet and tart with its blend of strawberry and margarita. Swisher Sweets Swerve is available for a limited time in a resealable two-count pouch with the “Sealed Fresh” guarantee and is ready for shipment to stores nationwide. It is offered in two for 99 cents, save on two and two for $1.49 options. Swisher strives to give customers exactly what they want with their limitededition cigarillos and Swerve is sure to be another favorite this summer. This edition of Swisher Sweets is available only while supplies last. Additional limited tastes are expected throughout 2018.

Mars Wrigley Confectionery is introducing the M&M’S Chocolate Cookie Sandwich, a tasty frozen treat that features reduced-fat chocolate ice cream surrounded by two home-style chocolate cookies with M&M’S Minis baked to perfection. With the debut of M&M’S Chocolate Cookie Sandwiches, M&M’S brand has answered the call from chocolate fans everywhere. M&M’S Chocolate Cookie Sandwiches are now available nationwide, with a suggested retail price starting at $4.99 per one six-pack box and $1.99 for one, four-ounce bar.

Company: Swisher Sweets

Company: Mars Wrigley

Confectionery

www.mms.com

Frozen Ice Cream Chipwich Crave Better Foods Inc. is re-launching its iconic frozen ice cream sandwich: Original Chipwich. The Chipwich now features premium ingredients for today’s discerning consumer. With production underway, the Original Chipwich is available for retail as a three-sandwich multipack (SRP $4.99) for both grocery and convenience stores. The individually-wrapped Chipwich has a SRP of $1.99. New York City, 1981: the Chipwich makes its delicious debut, becoming an instant classic. In 2011, the brand disappeared from store shelves after a 30year run, leaving a gaping hole in the category. Now, with a new parent company dedicated to making the classic even better, the Chipwich is back and ready to reclaim its iconic status. Today’s Original Chipwich sits squarely in the premium frozen dessert category, featuring the highest-quality ingredients, with nothing artiﬁcial.

Company: Crave Better Foods Inc. www.theoriginalchipwich.com

(800) 874-9720

http://trade.swishersweets.com/swerve/ cstoredecisions.com

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PRODUCTShowcase Tea-Flavored Slushes

Breaded Shrimp Dynasty Seafood provides Seafood from around the globe to distributors, convenience stores and restaurant chains across the country. Customers rely on Pacific Dynasty for products that delivery consistent high quality with economical pricing. Breaded shrimp offer many opportunities for the convenience store operators. Breaded shrimp go directly from freezer to fryer to consumer. Another advantage is when deep fried, breaded shrimp will not affect the flavor the frying oil. The two most frequently chosen items the company carries for convenience stores are breaded dinner shrimp or portioned-controlled pouch shrimp. Breaded dinner shrimp offer the flexibility of changing the piece count to fit a desired price point or menu cost. With a portioncontrolled pouch, the operator knows that regardless of time of day or who is working the portion size and cost is the same across all units. The customer can rely on the same eating experience no matter which location they frequent.

Company: Paciﬁc Dynasty Seafood www.paciﬁcdynastyseafood.com

Frozen and dispensed beverages are a convenience store favorite, especially for Millennials who are also driving demand for teas. Red Diamond offers them a combination of both teas and slushes with Früzen Frozen Teas—now in Citrus Green Tea and Peach Black Tea ﬂavors. Made with real tea, Früzen Frozen Teas are the perfect addition to any operation looking to maximize on the consumer call for healthier options.

Company: Red Diamond http://reddiamondbevservice.com

VitaminEnergy is activating new customers at the cash register by combining the health beneﬁts of an EmergenC drink with the energy and convenience of a 5-hour Energy shot. The result is a new, healthy alternative energy shot for the health-conscious adult on the go. The VitaminEnergy brand provides for instant utility recognition with consumers. Try VitaminEnergy in your store today to activate a new wave of customers at the cash register that are seeking a smart, healthy boost to their day.

Company: Vitamin Energy LLC www.vitaminenergy.com

Redesigned Cans XYIENCE (pronounced zi-ence), maker of zero calorie/zero sugar energy drinks made with all natural flavors and colors, has introduced a fresh can design and a convenient four-pack package. The new enhancements more clearly communicate the brand’s key value propositions and further meet the needs of consumers. The redesign features a crisp white background and a larger, more prominent placement of the product’s zero calorie/zero sugar benefits. Each can is also now represented with a highly visible top color band designed to easily differentiate among flavors. The upgrades create clearer product visibility on store shelves and a more visually appealing choice for consumers. XYIENCE’s new four-pack package has a SRP of $6.99. The new four-packs will be available in the brand’s three top-selling flavors: Cherry Lime, Mango Guava and Frostberry Blast. XYIENCE is available nationwide with a suggested retail price of $1.99 – $2.29 per 16-ounce can.

Company: XYIENCE www.xyience.com

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Healthy Energy

cstoredecisions.com

5/24/18 5:28 PM

PRODUCTShowcase Ultra Clean Diesel Renewable Energy Group Inc. (REG) has launched the company’s latest innovation in diesel fuel, REG Ultra Clean Diesel, at the Advanced Clean Transportation (ACT) Expo in Long Beach, California. REG Ultra Clean Diesel, among the lowest emission diesel fuels on the market today, is a patentpending fuel made of a proprietary blend of renewable diesel and biodiesel. REG Ultra Clean Diesel is California Air Resources Board (CARB) approved for year-round use throughout California under the Alternative Diesel Fuel Regulation. Versus CARB diesel, REG Ultra Clean Diesel reduces total hydrocarbons and carbon monoxide emissions by 15%, particulate matter emissions by 40%, and emits less nitrogen oxides (NOx). The fuel offers even greater emissions reductions when compared to conventional diesel.

Company: Renewable Energy Group Inc.

(515) 239-8104

www.regi.com/ultracleandiesel

Standby Generators

Summer Sampler For a limited time, White Owl’s new “Summer Sampler” brings an unbeatable trio of the fruits of summer, delivering a ﬂavor-ﬁlled variety of big, bright-tasting slow burn cigarillos. Enjoy three individually-wrapped cigars-Blue Raspberry, White Peach and White Grape-that all burst with their own unique, pleasing taste. On April 18, this new Limited Edition offering began shipping. White Owl Summer Sampler is available in a three for $1.49 format.

Company: Swedish Match

North America

(800) 367-3677

customer.service@smna.com

cstoredecisions.com

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Briggs & Stratton Corp. has added a 10-year warranty policy to its 12kW and 20kW Fortress standby generator units. The warranty policy is the longest in the industry — valued at $1,200 — and offers customers peace of mind through timely repair or replacement of parts on the dealer-exclusive standby generator models 040579 and 040592. The 12kW and 20kW Fortress units feature a 175mph wind rating with third party certiﬁcation (when installed in accordance with the installation manual) pre-installed oil heaters to save time and money and are housed in corrosion-resistant enclosures for added durability. As part of the dealer-exclusive Fortress line, the units offer a premium level of protection. As one of the more extensive warranty policies on the market, the new 10year warranty on both units covers parts and labor, as well as travel, for the full length of the policy.

Company: Briggs & Stratton www.briggsandstratton.com

Nicotine Toothpicks NICOSTICKS is launching as an alternative to smoking when smoking or vaping is not an option. NICOSTICKS will retail in convenience stores, airports, casinos and cruise ships across the U.S. Each NICOSTICK contains approximately three milligrams of nicotine, about the same as a cigarette. They are ﬂavor enhanced with Spearmint. Each NICOSTICKS box contains 20 toothpicks and retails between $3 and $4 depending on the outlet. Ten boxes of NICOSTICKS are merchandised in a countertop display case. NICOSTICKS have received preferred vendor status with AATAC, a trade association comprised of over 80,000 convenience stores.

Company: NICOSTICKS

Emial: info@nicosticks.com

www.nicosticks.com

June 2018 Convenience Store Decisions 79

5/24/18 5:28 PM

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5/25/18 3:28 PM

Classifieds /Ad Index ADD Systems

800.922.0972 / www.addsys.com

American Snuff Company

Apter Industries

800.441.7146 / www.apterindustries.com

www.axis-communications.com/us/retail-quick-guide

Axis Communications Brakebush

14-15

800.933.2121 / www.brakebush.com

Calico Brands

800.544.4837 / www.calicobrands.com

800.776.8834 / www.cdlatm.com

888.824.3256 / www.cbprices.com

866.254.6975 / www.cheyenneintl.com

631.686.2900 / www.clickitinc.com

800.377.7709 / www.cuevapor.com

52-53

Cash Depot

CB Distributors

Cheyenne International ClickIt

E-Alternative Solutions

Gulfcoast Software Solutions, Inc. 727.449.2296 / www.gulfcoastsoftware.com

Hunt Brothers

800.453.3675 / www.huntbrotherspizza.com/CSD

ITG Brands

JUUL

34-35

www.JUUL.com/retail/wholesale

KT&G

5, 7, 9

www.ktngusa.com

2018

Kretek

www.DjarumGiveaway.com

Krispy Krunchy

19, 65

800.290.6097 / www.krispycrunchycash.com

Liggett Vector Brands 877.415.4100

www.loomis.us/SafePoint

Loomis

Nat Sherman’s

NicoGen Pharma Solutions

516.693.7367 / www.RogueNicotine.com

866.481.4604 / www.nynab.com

www.orionfoods.com

Republic Tobacco

North American Bancard Orion Foods

SKUPOS

800.559.1358 / www.skupos.com/tobacco

www.smokeymountainsales.com

www.smokerfriendly.com/become-a-dealer

800.280.8089 / www.sparkvapor.com

Smokey Mountain Snuff Smoker Friendly Spark Vapor

Swedish Match

800.367.3677 www.GAMECIGARS.com www.whiteowlcigar.com

Swisher International

25, 46-47 45, 59

800.874.9720 / www.drewestate.com

SAVE THE DATE

Line up for NAG 2018 at the beautiful Ponte Vedra Inn & Club September 9th thru 12th II Ponte Vedra Beach, FL RETAILERS should contact John Lofstock at 201.837.2177 • jlofstock@csdecisions.com SUPPLIERS should contact John Petersen at 440.250.1583 • info@nagconvenience.com cstoredecisions.com

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June 2018 Convenience Store Decisions 81

5/25/18 1:13 PM

INDUSTRY

Perspective

Analyzing Your Stores’ Life Cycles Assessing operational locations requires an honest evaluation. By Mark Radosevich

y 13-year-old son came to me the other day asking for some help with a school science project related to evolution and the life cycles of things. Totally stumped and after making a feeble attempt to be helpful, I served up the only life cycle example that I know—the life cycle of a convenience store. Unfortunately, he wasn’t impressed, saying if he wrote about that, he’d fail the class. He headed to the kitchen to ask his mother. Later, I thought this would be a good topic for an industry article. Given the dynamic nature of the retail petroleum industry, store operators must take a pragmatic site-by-site view of their retail chain and be proactive in site rationalization. Because profitability is the primary driver for store viability, viewing a retail chain from an evolutionary life cycle perspective can provide valuable insight and direction. The difference between c-store evolution and biological evolution is that biological evolution generally assumes things improve with age. The opposite is true for c-stores, where constant competitive advances fuel obsolescence and eventual economic irrelevance. The following are c-store life cycles, and key items to consider.

1. Modern & Profitable: This is where a store and property meet current standards in size and offerings, yielding solid economic performance. Overall site value is high due to modern configuration and profitability. Considerations and Recommended Actions: Protect your position, stay alert for areas of potential competitive intrusion and disruption. This may involve purchase, deed restriction and resale of potential developmental sites. 2. Profitable: Ten or more years ago this was the first stage of a facility, yet this second stage still yields solid economic performance. Overall site value has fallen due to age and size constraints. The site could drop to the third stage. Considerations and Recommended Actions: Site is vulnerable to future competitive intrusion and impairment. Be proactive. If the property size is sufficient, consider razing and rebuilding to a modern standard. If the property size isn’t sufficient, assess other potential sites. 82 Convenience Store Decisions June 2018

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3. Marginally Profitable: In this stage, a store has average to low inside sales and fuel volume.

Mark Radosevich is a strong industry advocate and recognized petroleum veteran, serving both oil companies and marketers over his long career. He is president of PetroActive Real Estate Services, LLC. He can be reached by email at mark@ petroactive.net and directly by phone at 423-442-1327, his full professional bio can be found at www.petroactive.net.

Considerations and Recommended Actions: The continued direct operation of third stage sites is not optimal and divestiture and redeployment of the proceeds is advisable. An alternate-use evaluation of the underlying real estate should be made to determine if higher proceeds from a sale outside the industry is feasible. The outright sale of third-stage sites may be more preferable than a site retention/lease arrangement. If an alternate-use sale isn’t an option, it’s better to dump the property while the value is higher, versus risking dealer failure and having to take it back sometime in the future. 4. Marginally Branded: A marginally branded or unbranded site currently leased to a dealer marks the fourth stage. Considerations and Recommended Actions: Pragmatically assessing the long-term viability of the dealer class of trade will enable proactive decisions to be made on a site by site basis. With a strategic business plan in place, redeployment of recaptured equity from the sale of leased sites will help fuel the development of new first-stage facilities and better insure overall business viability and value. 5. Shuttered & Death: Littering the highways and byways of America are thousands of shuttered and vacant fifth-stage convenience stores, whose owners were overwhelmed by the intrusion of first-stage competitors that rendered their former fourth-stage sites unsustainable. IN SUMMARY Being both pragmatic and strategic with convenience store retail network management, coupled with decisive site divestiture or business life cycle adjustments is the best method to preserve business value and prevent fifthstage life cycle problems.

cstoredecisions.com

5/25/18 3:07 PM

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MOIST SNUFF

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5/15/18 11:11 AM