CStore Decisions June 2021

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CStoreDecisions

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Solutions for Convenience Retailers

2o21

Tobacco Outlook Despite robust sales during the pandemic, the tobacco category continues to face turmoil, from targeted regulations to supply issues.

June 2021

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Local, State and Federal tobacco taxes and restrictions on the sale of tobacco products can hurt your business. Governments often pass new laws quickly, so you need to stay informed about what is happening in your area. You and your business matter and making your voice heard is crucial to our success in fighting for fair tobacco policies.

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Robert Buhler, President and CEO Open Pantry Food Marts • Pleasant Prairie, Wis. Lisa Dell’Alba, President and CEO Square One Markets • Bethlehem, Pa. Raymond Huff, President HJB Convenience Corp. • Lakewood, Colo. Bill Kent, President and CEO The Kent Cos. Inc. • Midland, Texas Patrick Lewis, Managing Partner Oasis Stop ‘N Go • Twin Falls, Idaho Reilly Robinson Musser, VP, Marketing & Merchandising Robinson Oil Corp. • Santa Clara, Calif. Bill Weigel, CEO Weigel’s Inc. • Knoxville, Tenn.

NATIONAL ADVISORY GROUP (NAG) BOARD Doug Galli (Board Chairman), Vice President/General Manager Reid Stores Inc./Crosby’s • Brockport, N.Y. Mary Banmiller, Director of Retail Operations Warrenton Oil Inc. • Truesdale, Mo. Greg Ehrlich, President Beck Suppliers Inc. • Fremont, Ohio Derek Gaskins, Senior VP, Merchandising/Procurement Yesway • Des Moines, Iowa Joe Hamza, Chief Operating Officer Nouria Energy Corp. • Worcester, Mass. Brent Mouton, President and CEO Hit-N-Run Food Stores • Lafayette, La. Peter Tamburro, General Manager Clifford Fuel Co. • Marcy, N.Y. Vernon Young, President and CEO Young Oil Co. • Piedmont, Ala.

YOUNG EXECUTIVES ORGANIZATION (YEO) BOARD Jeremie Myhren (Board Chairman), Chief Information Officer Road Ranger • Rockford, Ill. Garet Bishop, Chief Financial Officer BFS Cos. • Morgantown, W.Va.

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Ryan Faville, Director of Purchasing Stewart’s Shops Corp. • Saratoga Springs, N.Y. Caroline Filchak, Director, Wholesale Operations Clipper Petroleum • Flowery Branch, Ga. Cole Fountain, Director of Merchandise Gate Petroleum Co. • Jacksonville, Fla.

Copyright 2021, WTWH Media, LLC

Kalen Frese, Food Service Director Warrenton Oil Inc. • Warrenton, Mo.

CStore Decisions (ISSN 1054-7797) is published monthly by WTWH Media, LLC., 1111 Superior Ave., Suite 2600, Cleveland, OH 44114, for petroleum company and convenience store operators, owners, managers. Qualified U.S. subscribers receive CStore 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. Periodicals postage paid at Cleveland, OH, and additional mailing offices. POSTMASTER: Send address changes to CStore Decisions, 1111 Superior Avenue, 26th Floor, Cleveland, OH 44114. GST #R126431964, Canadian Publication Sales Agreement No: #40026880.

Alex Garoutte, Director of Marketing The Kent Cos. Inc. • Midland, Texas Sharif Jamal, Corporate Brand Manager Chestnut Petroleum Inc. • New Paltz, N.Y.

CSTORE DECISIONS does not endorse any products, programs or services of advertisers or editorial contributors. Copyright 2021 by WTWH Media, LLC. No part of this publication may be reproduced in any form or by any means, electronic or mechanical, or by recording, or by any information storage or retrieval system, without written permission from the publisher. Circulation audited by Business Publications Audit of Circulation, Inc. ©

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CONTENTS june 2021

Number 6

Volume 32

CStoreDecisions

®

EDITOR’S MEMO

10 Understanding the Leadership Path FRONT END

14 Sheetz Meeting the Charge for Talent Acquisition 20 QuickBites: Estimating the Return to Normal 22 What Are Modified Risk Tobacco Products? CATEGORY MANAGEMENT

38 Cigarette Sales Show Strong Rebound 42 Cigars Face Proposed Federal Flavor Ban 48 Vape Sees Gains Despite Restrictions 52 Modern Oral Nicotine Sales Bolster Smokeless Segment 56 Lighter Sales Blazing 60 Get Prepared for the Possibility of Selling Cannabis 63 The CBD Opportunity: CBD in C-Stores

COVER STORY 28 2021 Tobacco Outlook

FOODSERVICE

Despite robust sales during the pandemic, the tobacco category continues to face turmoil, from targeted regulations to supply issues.

64 Focus on Foodservice Reaps Big Rewards TECHNOLOGY

70 Contactless Payment Comes to the Forefront 74 Where Do Loyalty Programs Go From Here?

52 8

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BACK END 80 Product Showcase 85 Ad Index 86 Industry Perspective: Third-Party Delivery Apps — Friend or Foe? cstoredecisions.com


HIGHER MARGINS FOR INDEPENDENTS, BETTER VALUE FOR THEIR CUSTOMERS Consumer Value Products (CVP) is McLane’s premier private label brands subsidiary that offers top quality, low cost products to consumers and high margins for independent operators. It offers them the buying power of larger chains through McLane’s scale. CVP has over 180 SKUs available in a variety of categories including general merchandise, health and beauty, candy, salty snacks, automotive, and household essentials. Independent operators can trust that CVP is the right brand for their stores and their customers. To learn more, visit cvpproducts.com/info © 2021 McLane Company, Inc. All rights reserved.


Editor’s Memo

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

Understanding the Leadership Path As we emerge from the COVID-19 pandemic, leadership and good business decisions are necessary for success. The pandemic did many things to retail, the least of which was to require people in positions of power to make business-altering decisions that will have a long-term impact on the future of their companies. It’s times like these that leaders, especially young leaders, cannot afford to let ego get in their way. As a leader, and or for those on a path to leadership in the convenience store and petroleum industry, everything you say and do is amplified. The optics will be even further amplified at a family-owned business, where employees take a cue from your behavior. When you inspire others, help employees grow and keep people connected to their passion and purpose, performance soars. When you micromanage employees, steamroll over everyone, or focus on what you can get from others rather than how you can serve them, performance withers. This was the subject of Karen McGregor’s book, “The Tao of Influence: Ancient Wisdom for Modern Leaders and Entrepreneurs.” In order to provide real leadership at any age, leaders must keep their egos in check. “When our ego is running the show, we not only fail to reach our potential as leaders, we hold others back from reaching theirs,” McGregor said. McGregor discussed five common ego needs leaders should examine that could be undermining their potential to do great things. • The need for approval. Anytime you look for approval for something you have said or done, you are asking for validation of your worthiness from outside of yourself. McGregor said that no matter how much praise or how many awards you receive over the years, if you always need validation, you will eventually make decisions to feed your ego. Focus on making the right decisions. • The need to be right. Trying to control others and needing to be right diminish our power and weaken our ability to influence. They take the life out of creativity and destroy new solutions to old problems. Sometimes leadership requires taking direction and accepting guidance. • The need to get something from someone. This is a 10

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survival need and stems from the fear that you won’t be provided for, that there isn’t enough or that you aren’t good enough. If you experience this need, it pulls you away from alignment with what you know is right. “For business leaders, it might feel like the business will die if you don’t get the best deal,” McGregor said. “Yet that’s highly unproductive. If you operate with the energy of fear, anyone you are negotiating with will sense something is off. They might want to work with you, but they won’t cement the deal, and they won’t be able to articulate why. Instead, focus on your desire to be of service to others.” • The need to stay safe. Sometimes the need for safety can become one’s primary reason not to pursue greatness. The fear of change — that something will be taken away or something bad will happen — is quite commonplace. Yet, it can rob us of the ability to be powerful influencers in the business world. • The need to protect against criticism. Feedback shouldn’t be feared. Powerful people embrace it. Smart organizations strive to create an environment where it’s safe to offer dissenting opinions. For example, Steve Jobs gave an annual award to an Apple employee who would challenge him in a way that led to company growth and product perfection. “Regularly meet with a handful of brave people who challenge you just as you challenge them,” McGregor said. “These should not be people-pleasing friends; they should have dissenting opinions. It may seem counterintuitive, but every great leader with lasting influence minimizes blame and focuses on personal responsibility instead.” When you no longer need to engage with the needs of your ego, you will be a better leader. People will feel safe enough to tell you the truth. You can energize and inspire your team. And you will find your work far more fulfilling because you will finally be leading in a way that’s aligned with your natural abilities.

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FRONT END Leadership Spotlight

Sheetz Meeting the Charge

for Talent Acquisition

James Colino heads the recruiting efforts for the 621-store chain, which has met every challenge during the coronavirus pandemic, while simultaneously expanding its fleet of stores.

James Colino, head of talent acquisition, Sheetz Inc.

John Lofstock • Editor-in-Chief

Sheetz Inc. is a dynamic and growing family-owned and -operated restaurant and convenience chain. The Altoona, Pa.-based company operates 621 stores Pennsylvania, West Virginia, Virginia, Maryland, Ohio and North Carolina and has more than 20,000 employees. The company is focused on continuing to deliver on its mission to provide total customer focus across all the communities it serves with the safety of all who walk through its doors as the top priority. Since the start of the pandemic, Sheetz has established several safety measures to protect the health and wellness of its employees and customers. This includes conducting employee wellness checks before every shift and implementing enhanced routine daily cleaning procedures with a focus on high-touch surface areas such 14

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Sheetz is a two-time CStore Decisions Chain of the Year and was named 2020 Best Regional Fast Food Chain by USA Today’s “10Best Readers’ Choice” travel awards.

pumps, order points, countertops, checkout lines, door handles and more. All of its hard work has not gone unnoticed. Sheetz is a two-time CStore Decisions Chain of the Year (1994 and 2017) and was named 2020 Best Regional Fast Food Chain by USA Today’s “10Best Readers’ Choice” travel awards. Its role in the community extends far beyond the food counter and gas pumps. Sheetz is deeply committed to supporting the local communities it calls home and has been a national supporter of Special Olympics for over 25 years. The company also makes a positive impact in communities through its Made-to-Share food donation program and the Sheetz for the Kidz holiday donation campaign for children in need. A company this busy, and which serves more than 1.5 million customers every day, needs to have the right people in the right places. This is especially challenging now as recruiting and retaining good people has become a complicated process. Heading the charge to acquire great talent at Sheetz is James Colino, head of talent acquisition, whose job it is to help extraordinary people find a home at Sheetz. Colino sat down with CStore Decisions to discuss talent acquisition and how the labor market will evolve over the next few years. CStore Decisions (CSD): How do you develop a sound talent acquisition strategy when the labor, technology and business environment is changing so rapidly? James Colino (JC): When I work on strategy, I don’t place my big bets on trying to predict changes that will happen in the future. Instead, I focus on the things that will always be true no matter what is happening inside or outside of the company. That means observing what people are doing today and extrapolating on the behaviors or preferences that 16

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will remain constant three, five or even 10 years into the future. For example, a few years ago, people became dependent on their mobile phones to the point where almost no one will answer a call or read their email. I have strategic bets that this will continue. So we’re working hard at Sheetz to create more ways to engage with talent (and hiring managers) via their mobile device and make our process more convenient using human-assisted technology. CSD: What do you mean by human-assisted technology? JC: Well, there are recruiting processes today that are fully automated. You don’t even need to speak to a human to apply, interview or get a job offer. While that is incredibly efficient, it’s not built for a company like Sheetz where we care deeply about the human-to-human connection that we have with each other as coworkers and with our customers. So even in places where we have automation or technology, there’s a friendly recruiter somewhere behind the scenes waiting to lend a hand. It’s hard to

Sheetz is working to create more ways to engage with talent and hiring managers via their mobile devices and to make its process more convenient using human-assisted technology.

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FRONT END Leadership Spotlight

Sheetz’s Colino cites four distinct labor markets in the past year: pre-pandemic, pandemic uncertainty, lockdown and the current market, in which jobs available outweigh labor market participation.

do this at scale (and it costs more), but in the end, we think a human experience will be a differentiator when the rest of the world leans into the opposite approach. CSD: How would you assess the current market for labor, and how do you think it will change over the next few years? JC: In the last 12 months, we’ve seen four distinct labor markets: pre-pandemic, pandemic uncertainty, lockdown and, now, I’m not even sure what to call our current situation! I’ve never seen a market where there are so many jobs available but so little labor market participation. How long this lasts and what happens on the other side of this recent trend is unknown. I think what we’re seeing is the uncoiling of a pent-up desire for people to have more flexibility at work, get paid more, have better benefits and so on. What person wouldn’t want that? So I would expect this to continue as a labor market trend, but not indefinitely.

CSD: Do you see more people returning to the office sooner rather than later? JC: Not everyone wants to sit on Zoom calls all day, isolated from their coworkers. And not all business models work with remote employees or indefinite wage increases. Something has to give. In the long term, I think if companies focus on a win-win solution between business model and labor preferences, everyone will be in a better place.

CSD: Why should people come to work for Sheetz? JC: Whenever I get a question that has so many possible (great) answers, I always revert to first-principle thinking. This just means getting down to a basic truth. From that perspective, I believe that all companies compete on just one thing — how they treat their employees. Put excellent pay, benefits, brand, growth, location or whatever you want on the table, but people generally will not stay at a company if they’re not treated well or feel valued. At Sheetz, our competitive advantage is something that my recruiting team calls our “work family” or “work fam” for short. It’s a term that captures how the Sheetz family takes care of its employees and how our employees take care of each other. It’s a culture unlike anything I’ve seen before. Fortunately, we have all of the other components, too. So we like to say that people come All companies compete on one thing, said James Colino, Sheetz’s head of talent acquisition — for the perks and stay for the how they treat their employees. culture. 18

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quickBites ESTIMATING THE RETURN TO NORMAL CUSTOMERS FEELING OPTIMISTIC 56% feel optimistic about the year ahead. 60% predict a return toward normality within the year.

SHOPPING BEHAVIOR CHANGES

84% of consumers plan on shopping in person during the year. 29% plan to do all shopping in person. 23% plan to do most of their shopping in person with some online shopping. 59% plan to continue shopping locally in support of smaller businesses. 58% have adopted new behaviors due to increased time shopping online.

Source: “New Normal: How Consumer Behaviors Are Likely to Change in the Months Ahead,” April 2021. Tremor Video and Unruly surveyed a nationally representative sample of 893 U.S consumers.

DO YOU PLAN TO FLY IN THE NEXT SIX MONTHS? September 2020: 36% Yes / 64% No April 2021: 44% Yes / 56% No Source: CivicScience, Sept. 1, 2020 to April 30, 2021; 32,645 responses weighted by U.S. Census 18+

PANDEMIC SPURS DIGITAL ORDERS In the year ending March 2021…

HOW CONCERNED ARE YOU ABOUT BEING IN PUBLIC PLACES RIGHT NOW?  124% Overall restaurant digital orders  130% Digital orders for carryout (62% of digital orders)  142% Digital orders for delivery (38% of digital orders) Source: NPD Group’s foodservice market research, CREST; ending March 2021

15% “VERY CONCERNED” (lowest percentage observed so far during pandemic) 40% “SOMEWHAT CONCERNED” 45% “NOT AT ALL CONCERNED”

Source: CivicScience data; 332,544 responses weighted by U.S. Adults from 4/8/2020 to 4/29/2021

MOST (60%) OF CUSTOMERS PREDICT A RETURN TO NORMAL IN 2021 If you had to make a prediction about the year ahead, when do you expect you will be able to return to a more-or-less “normal” lifestyle?

31% Spring/summer 2021

29% Winter/fall 2021

25% 2022 or later

16% I don’t know

Source: “The NEW New Normal: How Consumer Behaviors Are Likely to Change in the Months Ahead,” April 2021. Tremor Video and Unruly surveyed a nationally representative sample of 893 U.S consumers.

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FRONT END Tobacco Update

What Are Modified Risk Tobacco Products? To date, the FDA has authorized 12 products to be marketed as modified risk tobacco products. Thomas Briant • NATO Executive Director

The term ‘modified risk tobacco products’ came onto the scene after regulators became concerned that tobacco products marketed using words like “light” or “mild” might give consumers the impression that the products posed less of a health risk than other tobacco products. Consequently, the Family Smoking Prevention and Tobacco Control Act, enacted into law in 2009, made it illegal for tobacco products to be marketed as lower risk products unless the Food and Drug Administration (FDA) authorized such a designation. Based on the Family Smoking Prevention and Tobacco Control Act, the FDA created an application process for manufacturers to seek authorization to market their product as lower-risk alternatives as prescribed by the FDA. To obtain the designation as a modified risk tobacco product (MRTP), a manufacturer must demonstrate to the FDA that the product “will, or is expected to, benefit the health of the U.S. population as a whole.” That is, after considering the entire population of users and non-users of the product, is the product beneficial to the public health?

SEEKING MRTP STATUS Manufacturers must apply for each product they wish to have designated as a MRTP; that is, they cannot submit one application for an entire class of products. After it is filed with the agency, the application is made available for public comment and referred to 22

CSTORE DECISIONS • June 2021

the FDA’s Tobacco Product Scientific Advisory Committee, which undertakes a rigorous scientific analysis of the manufacturer’s claims and the scientific data provided to support that claim. When filing a MRTP application, manufacturers are required to provide the FDA with a great deal of detailed information regarding each product, including: • The relative health risks to individuals who would use the product. • The likelihood that existing users of tobacco products will switch to the product rather than quit altogether or that persons who do not use tobacco products will use the product. • The risks and benefits to persons from the use of the product compared to approved smoking cessation products. The FDA will only authorize a product as a “modified risk tobacco product” if, at the end of the agency’s detailed review of this information, a determination is made that the product will or is expected to benefit the health of the entire population. If the application is authorized, the manufacturer is directed to conduct certain studies to

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FRONT END Tobacco Update

determine how the modified risk authorization order impacts consumer perception, behavior and health, giving the FDA the ability to review whether the basis for its grant of the MRTP application was correct. MRTP designations are only granted for fixed time periods. To continue marketing the product as a MRTP beyond that time, the manufacturer must submit a new application to the FDA that shows it still satisfies the requirements of MRTP authorization. Thus far, the FDA has authorized 12 products to be marketed as MRTPs. The first products to be authorized to use the MRTP designation were eight General Snus products manufactured by Swedish Match Inc. (Loose; Dry Mint Portion Original Mini, Portion Original Large, Classic Blend Portion White Large-12 ct, Mint Portion White Large, Portion White Large and Wintergreen Portion White Large). These authorizations were issued on Oct. 22, 2019, and are in effect for five years, and Swedish Match may make the following statement about these products: “Using General Snus instead of cigarettes puts you at a lower risk of mouth cancer, heart disease, lung cancer, stroke, emphysema and chronic bronchitis.” On July 7, 2020, the FDA authorized four products manufactured by Philip Morris Products S.A., namely the IQOS system holder and charger and three heatsticks for use with that system: Marlboro Heatsticks, Marlboro Smooth Menthol Heatsticks and Marlboro Fresh Menthol Heatsticks. Although the FDA found the products to be modified risk tobacco products, it denied the 24

CSTORE DECISIONS • June 2021

marketing of the products with reduced risk claims at that time, but authorized their marketing for four years with this reduced exposure claim:

AVAILABLE EVIDENCE TO DATE: • The IQOS system heats tobacco but does not burn it. • This significantly reduces the production of harmful and potentially harmful chemicals. • Scientific studies have shown that switching completely from conventional cigarettes to the IQOS system significantly reduces your body’s exposure to harmful or potentially harmful chemicals. Currently, FDA is reviewing three MRTP applications: On March 31, 2017, R. J. Reynolds Tobacco Co. applied for Camel Snus Frost; on March 20, 2018, U.S. Smokeless Tobacco Company applied for Copenhagen Snuff Fine Cut; and on July 19, 2019, 22nd Century Group Inc. applied for two cigarette products, VLN King and VLN Menthol King. The public comment period on each of these products expired in 2020, demonstrating how long the MRTP application process can be. Thomas Briant is the executive director for the National Association of Tobacco Outlets (NATO). NATO’s mission is to enhance the business interests of retailers that sell tobacco products, support the legislative and regulatory interests of members and encourage the expansion of the retail tobacco segment in a responsible manner. He can be reached at info@natocentral.org. cstoredecisions.com


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2021 TOBACCO O Despite robust tobacco sales during the pandemic, the tobacco category continues to face turmoil from targeted regulations to supply issues. Anne Baye Ericksen • Contributing Editor

28

CSTORE DECISIONS •

June

2021

cstoredecisions.com


O OUTLOOK Every year, the tobacco category gets hit with some kind of twist that convenience store owners and operators must accommodate. Five years ago, it was the deeming rule from the Food and Drug Administration (FDA) that lumped electronic nicotine delivery systems (ENDS) and other tobacco products (OTPs) in with cigarettes. At the end of 2019, the federal government raised the minimum purchase age to 21, quickly followed by the FDA ban on flavored ENDS other than disposable e-cigarettes and open vaping systems. This April, the agency confirmed it is contemplating a national ban on menthol cigarettes and flavored cigars. Oh, and of course, convenience stores are still dealing with the long-haul economic effects of COVID-19. Despite all this, the tobacco category is experiencing some uplifting developments. For example, the oral nicotine segment continues to push forward, and even cigarettes withstood the unprecedented circumstances of the past 15 months. Now, as foot traffic picks up, it’s an opportune moment to assess what the all-important c-store category — accounting for more than one-third of in-store transactions — has in store for the rest of the year.

cstoredecisions.com

June 2021 •

CSTORE DECISIONS

29


2021 Tobacco Outlook

CIGARETTES HOLD STRONG

Perhaps one of the most unexpected outcomes for convenience stores during the pandemic has been the uptick in cigarette sales. Market analysts don’t believe there’s suddenly a population explosion of new smokers. Rather, they cite coronavirus lockdowns and remote working instigating the surge. Smokers not only stocked up in the early days of the stay-at-home orders, but free from being remanded to a remote outdoor corner to smoke, people apparently indulged more often. CStore Decisions reported last year that between April 28 to May 11, 2020, 31% of cigarette users admitted smoking more frequently. Although the hoarding of cigarette cartons eased up as the months passed, sales maintained a positive course. Cigarette dollar sales in U.S. convenience stores gained 1.5% for the 52 weeks ending April 18, 2021, per data from IRI, a Chicago-based marketing research firm. When compared with the same period last year, unit sales slipped by 4.9%. The dip could be attributed to a slowdown from the pandemic-inspired stockpiling, but national data suggest the trend has held strong. For the four weeks prior to April 18, unit sales posted a 1.7% increase, accompanied by 5.5% gain in dollar sales. Nielsen research also recorded a 5.0% increase during the month of March. “Overall cigarette volume was flat in Q1; however, we continue to see increased market share in regions outside of Colorado,” noted Tim Greene, category director of tobacco and GM for Smoker Friendly. Its parent company, The Cigarette Store Corp., based in

30

CSTORE DECISIONS •

June 2021

Boulder, Colo., operates more than 160 retail stores across seven states, including Gasamat convenience stores, as well as tobacco outlets and cigar lounges. “Roll-your-own (tobacco) has improved given the passing of Prop. EE in Colorado, where 35% of our stores reside,” he added. Approved in November, the proposition sets minimum prices for tobacco products, adds an incremental increase to the statutory tax for cigarettes and establishes taxes for previously untaxed ENDs. NICOTINE POUCHES PROP UP OTPS

While the cigarette flare-up may burn out as people return to the workplace, the momentum pushing up OTPs started before the pandemic and is expected to carry on afterwards. The oral nicotine segment, in particular, keeps ringing up profits. “We have seen early success with the nicotine pouches and are working to expand assortment as we prepare for increased growth,” said Matthew Nefferdorf, director of retail marketing for CrossAmerica Partners LP. Based in Allentown, Pa., the company distributes fuel to approximately 1,700 retailers over 34 states as well as operates convenience stores. “The category is getting a bit crowded, but we do see consumers gravitating to this type of nicotine delivery,” commented Kaitlyn Meara, category manager, tobacco, for GPM Investments. Based in Richmond, Va., it is owned by ARKO Corp., which operates approximately 2,950 locations, including about 1,350 company-operated stores and approximately 1,600

cstoredecisions.com



2021 Tobacco Outlook

Like many c-store retailers, GPM Investments is seeing the customer trend toward nicotine pouch purchases. The chain is anticipating a busy summer for the tobacco category as COVID restrictions subside.

dealer sites to which it supplies fuel in 33 states and Washington, D.C. IRI reported dollar sales of spitless tobacco items jumped 52.4% for the four weeks ending April 18 compared with the same period in 2020, nearly matching the 52-week gain of 54.1%. Unit sales jumped more than 67% for the four weeks and nearly 60% for 52 weeks. Anna Bettencourt credits the product’s discreet nature for its growing acceptance. “Nearly every office or public space has a no-smoking policy, and vaping is typically included because of the vapor it produces. The spitless pouches don’t produce any of that. You can use pouches almost anywhere, so it’s a great alternative,” said the senior category manager for Haffner’s c-store chain, owned by

Energy North Group Inc. The company, headquartered in Lawrence, Mass., also runs gas stations, car washes and foodservice sites in Massachusetts, New Hampshire, Maine and New York. That said, smokeless tobacco products, including snus, still substantially outsell spitless options, totaling $7.1 million versus $1.1 million, respectively, per IRI. E-CIGARETTES REBUILD MARKET SHARE

ENDS continue delivering for c-stores. “E-cig sales make up close to 41% of our OTP sales today versus 27% a year ago. These higher-ticket items, both in retail price and margin, have really helped drive

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2021 Tobacco Outlook

Total Tallies

The ups and downs of the many product lines within the tobacco category seem to balance out in favor of c-stores. Dollar sales in U.S. convenience stores: Latest 52-week period ending April 3, 2021

% Change vs. previous year: 52 weeks

% Change vs. previous year: latest 13 weeks

% Change vs. previous year: latest 4 weeks

Cigarette tobacco

$30.5 M

-12.6%

-19.8%

-34.3%

Cigarettes

$53.8 B

4.5%

5.1%

5.0%

Cigars

$3.6 B

13.1%

10.6%

8.1%

Pipe tobacco

$131 M

-4.1%

-12.1%

-24.6%

Shag

$7.0 M

6.8%

-6.0%

-23.5%

Smokeless tobacco

$7.4 B

8.3%

6.1%

4.5%

Tobacco combination packs

$14.2 M

35.4%

25.1%

12.5%

Electronic cigarettes

$4.0 B

7.5%

13.2%

5.9%

Subcategory

Source: Nielsen IQ: Market, Total US Conveniece data, run May 5, 2021

overall profitability in the OTP category,” said Nefferdorf. Indeed, both Nielsen and IRI calculated growth for ENDS in a year/year comparison of dollar sales — 7.5% per Nielsen and 10.5% per IRI. This growth comes despite the fact that products without premarket tobacco applications (PMTAs) had to be pulled last fall. At press time, FDA had just announced 6 million deemed new tobacco products were approved following the PMTA process. PMTA approvals/nonapprovals will hopefully provide some consistency to planograms following several years of an evolving environment of brands from startups to Big Tobacco to new technology and expanding regulations. CIGAR SUPPLY STRUGGLES TO MEET DEMAND

U.S. sales in 2019 reached $4.2 billion, representing a 562% jump from the previous year, according to Brightfield Group. Last year, CBD sales slowed, but by Q4, a rebound appeared underway. Tinctures and topicals posted the best gains, whereas gummies had minimal loss after a positive 7% showing in Q3, according to research from Management Science Associates. “CBD continues to be a steady category through the first part of 2021, led by Solari Hemp’s gummies, tinctures and six-pack offerings,” said Greene. Analysts suspect the category will make steady gains in the coming months, but don’t anticipate a return to pre-pandemic levels until next year. Then again, a national survey by Invisibly suggests there’s substantial

The cigar subcategory probably suffered the most from COVID-19 conditions because distributors strained to meet c-store orders under manufacturing slowdowns. “We did see a pinch on supply as it relates to our cigars and wraps. Supply still remains tight on these items,” noted Nefferdorf. “We work closely with the manufacturers to understand timing and potential remedies,” added Meara. In spite of that, dollar sales for cigars bumped up more than 13% for the 52 weeks ending April 4, according to Nielsen research. IRI reported similar findings at 11.5%. CONCENTRATING ON CBD

Although not derived from tobacco or containing nicotine, the cannabidiol (CBD) category has earned its place as a c-store profit producer. Since the 2018 Farm Bill authorized the sale of hemp-derived products, c-stores have built up CBD offerings. 34

CSTORE DECISIONS •

June 2021

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room to grow the market now. Thirty percent of respondents who admitted to never trying a CBD product said they would consider using it. Bettencourt plans to go bold this year with Haffner’s CBD category by expanding brand selection. “I don’t think the category has reached its full potential across the industry. To me, it very much mirrors where the e-cigarette and vaping category was six or seven years ago,” she said. READYING FOR NEW REGULATIONS

As impactful as the pandemic was on the tobacco category, regulations always affect how c-stores manage the back bar. In addition to the PMTA deadline and federal flavored tobacco ban on most ENDS, several states moved to restrict sales of flavored products. The National Association of Tobacco Outlets (NATO) tracked more than 160 local ban proposals in 2020. Also, California joined Massachusetts in passing a statewide ban that includes menthol products. However, a signature-gathering campaign to place the topic on the 2022 ballot postponed its enactment. “Like in 2019 and 2020, 2021 has seen a number of states consider flavor bans impacting tobacco and nicotine vaping products. Thus far, none of these bills has become law, and the bill that is closest to becoming law — a Connecticut proposal specific only to vaping products — has an exemption for products with PMTAs filed or authorized by the FDA,” said Gregory Conley, president of the American Vaping Association. Interestingly, some bills have sought to prevent additional regulations. “We have seen a number of states — Florida, Montana and Tennessee among them — pass bills to preempt local governments from banning or stringently regulating the sale of tobacco and/or nicotine products,” said Conley. On Capitol Hill, lawmakers introduced the Tobacco 36

CSTORE DECISIONS •

June 2021

Tax Equity Act of 2021, under which the federal government could set the minimum retail price on all tobacco products. That amount would be tied to inflation, so it could go up based on economic factors. “The gigantic tax hike on smokeless tobacco and vaping products would undoubtedly be detrimental to many convenience store owners, as these products are a growing category that are helping adult consumers transition away from combustible cigarettes,” said Conley. Then there’s the issue of a potential federal menthol ban. In 2019, Massachusetts became the first state to add menthol to its prohibited flavors, which was implemented last summer. When New York legislators confirmed they were contemplating a similar bill, the New York Association of Convenience Stores (NYACS), along with other retail organizations, commissioned a study to assess the financial fallout. Researchers concluded the expanded ban could end up eliminating more than 1,200 jobs and approximately $454 million in tax revenue. Plus, the study found c-stores could lose sales equivalent to the combined average income of 80 New York convenience stores. In April, FDA said it plans to announce a ban on menthol cigarettes and flavored cigars within the next year — a move that would be clearly detrimental to c-store retailers. “As part of the rulemaking process, FDA will accept and review comments on the impact of the proposed rules on tobacco and other industries, including the projected impact on domestic jobs,” an FDA spokesperson told CStore Decisions. Already opponents have vocalized concerns. “If it is enacted, I think we will see what we’ve seen in Massachusetts; the product will be sold illegally across the country as opposed to just across the state. There is such a high demand for menthol, and that cstoredecisions.com

P


does not go away overnight,” said Bettencourt. “Menthol is over 37% of the tobacco market. The National Association of Convenience Stores (NACS) is on record opposing menthol bans as we believe illicit vendors will quickly source and begin selling foreign and counterfeit menthol cigarettes,” said Lyle Beckwith, NACS senior vice president, government relations. “Illicit vendors do not verify age, do not collect and remit taxes, and sell other illegal products beyond just menthol cigarettes. We have not yet seen the FDA proposal, so I cannot comment on a specific response, but we are prepared (if necessary) to activate the industry in any appropriate fashion.” Even the American Civil Liberties Union has spoken out against a menthol ban, citing the disproportionate impact on communities of color. According to the National Survey on Drug Use and Health, African Americans constitute 85% of menthol consumers. At this point, it’s difficult to accurately predict what will transpire with menthol restrictions or federal taxes, but the tobacco sector has a history of unpredictability. C-store owners and operators who incorporate flexibility into their category management strategies allow room to respond and protect profit margins.

“We are always looking to ensure we remain one step ahead as this category continues to evolve and customer buying habits change,” said Nefferdorf. “Our tobacco category manager is currently reviewing space-to-sales for each of the subcategories in our stores, so we can work to allocate the proper amount of space to those items we are seeing positive growth on. This analysis will allow for us to complete back bar resets and eliminate any slow movers during the process. By ensuring proper space by subcategory, we hope to reduce any out-of-stocks and avoid any inconvenience to our customers.” “We believe that we are positioned nicely as the states start to relax COVID restrictions,” concluded GPM’s Meara. “We think there is a lot of pent-up spending power that we hope to benefit from through our busy summer months.” CSD

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Category Management | Cigarettes

Cigarette Sales Show Strong Rebound Despite taxation and regulation, convenience store retailers remain optimistic about this lucrative category, though a potential ban on menthol products is looming. John Lofstock • Editor-in-Chief

When c-store operators talk cigarettes these days, they inevitably end up talking taxation and legislation. And as America struggles to find the proper balance between individual rights and societal responsibility, retailers everywhere are getting squeezed. But as we emerge from the COVID-19 pandemic, there is reason for optimism as cigarettes over the past year have shown a remarkable ability for bouncing back. In terms of a year-over-year comparison, for the 52 weeks ending April 18, 2021, unit sales of cigarettes slipped 4.9%, in large part due to the pandemic and tax hikes. However, for the four weeks ending April 18, 2021, unit sales 38

CSTORE DECISIONS •

June 2021

rebounded, increasing 1.7% over the same period in 2020, suggesting consumers are making more trips to the convenience store as they emerge from the COVID-19 pandemic, according to Chicagobased research firm IRI. But where the numbers really start to stand out is across urban independent stores, where sales have been booming for the past 12 months.

cstoredecisions.com



Category Management | Cigarettes

Sales of Cigarettes Remain Solid

For most convenience store categories, flat year-over-year sales figures would not be good news, but for cigarettes it signals a reprieve from several years of declining sales due to restrictive legislation and onerous tax hikes. For the 52 weeks ending April 18, 2021, unit sales of cigarettes dipped 4.9%, in large part due to the pandemic and tobacco tax hikes that impacted more than a dozen states. However, for the four weeks ending April 18, 2021, unit sales rebounded nicely, increasing 1.7% over the same period in 2020, according to IRI, suggesting consumers are making more trips to the convenience store as they emerge from the COVID-19 pandemic. The unit increase comes despite an average increase per pack of 27 cents.

Cigarette Sales One-Year Comparison

Dollar Sales

Unit Sales

Price Per Unit

Current

1-Year % Change

Current

1-Year % Change

Current

1-Year Change

$56.52 B

1.5%

7.20 B

-4.9%

$7.85

$0.49

Source: IRI Market Advantage - TSV, Total U.S. Convenience data for the 52 weeks ending April 18, 2021

Cigarette Sales Comparison for the Previous Four Weeks

Dollar Sales

Unit Sales

Price Per Unit

Current

1-Year % Change

Current

1-Year % Change

Current

1-Year Change

$4.40 B

5.5%

541.64 M

1.7%

$8.12

$0.29

Source: IRI Market Advantage - TSV, Total U.S. Convenience data for the four weeks ending April 18, 2021

National Retail Solutions (NRS), format and other tobacco licensed accounts, it has failed miserably.” which tracks scan data at indepenretailers,” said Brandon Thurber, Still, legislative threats will continue dent convenience and small-format director of scan data insights and to plague the category, with menthol outlets, found for calendar year 2021 media measurement for NRS. “Toin particular remaining in the crossthrough May 15 that cigarette volume bacco brands that recognize this and hairs of local and federal regulators. is up 6% at urban independent mardeploy a strategy against the oppor“What we’re seeing now is a signifikets. In 2020, tobacco enjoyed a steltunity will be sure to realize results.” cant amount of pressure on menthol lar 10% increase in the NRS network, and flavor bans that are causing both exceeding the performance of the MENTHOL MADNESS the cigar and the cigarette outlook to convenience industry as a whole. The Food and Drug Administration be under pressure. However, with the By the numbers, NRS reported (FDA) is proposing a ban on menthol warmer weather and the opening up that all tobacco categories enjoyed cigarettes. This follows the 2020 Mas- of the economy, I am seeing cigagrowth with smokeless, cigars and sachusetts ban on menthol cigarettes. rettes start to climb in the last few roll-your-own (RYO) showing the “Bans don’t work. They particularly weeks or month, and that is helping,” greatest year-on-year percent growth don’t work with traditional tobacco,” said Frank White, the Massachusetts in dollar sales. The increases for each said Jonathan Shaer, executive direcand Connecticut merchandising segment are: tor of the New England Convenience manager for Mt. Vernon, N.Y.-based • Cigarettes, 8% Store and Energy Marketers AssociaAtlantis Management Group, which • Cigars, 18% tion (NECSEMA). “In the 11 months operates a network of more than • Smokeless, 22.5% since Massachusetts banned flavored 100 stores. “However, with the major • Pipe, 11% tobacco, New Hampshire and Rhode manufacturers putting some effort • RYO, 17% Island have made up 85% of the cigainto the marketing, we will see better • Vape, 2% rette sales Massachusetts relinquished. returns coming down the pike, but “In NRS Stores through May 15, These products have either returned that doesn’t mean they’re going to year-to-date 2021 cigarette sales con- for personal consumption or illegal see growth in units. The reality is tinue to show strong growth across sales. So the state has given up over we are in a cycle of lost units but the category, even over a strong 2020, $120 million in excise tax revenue and increasing retails. This is buoying the in independent convenience, smallhas the same consumption. So by all category but it won’t for long.” CSD 40

CSTORE DECISIONS •

June 2021

cstoredecisions.com



Category Management | Cigars

Face Proposed Federal Flavor Ban With news that the FDA plans to ban flavored cigars, c-store retailers take stock of the category. Howard Riell • Contributing Editor

The late-April announcement by the Food and Drug Administration (FDA) that it plans to effectively ban all flavors of mass-produced cigars (as well as menthol cigarettes) within the next year sent a loud warning signal to c-store operators, for whom flavored cigars are a popular item. The proposed ban is intended to “help significantly reduce youth initiation, increase the chances of smoking cessation among current smokers and address health disparities experienced by communities of color, low-income populations, and LGBTQ+ individuals, all of whom are far more likely to use these tobacco products,” said Acting FDA Commissioner Janet Woodcock, M.D. 42

CSTORE DECISIONS •

June 2021

The ban is expected to pose harsh consequences for convenience stores. The convenience store channel saw sales of cigars top $3.9 billion, an impressive 11.5% increase for the 52 weeks ending April 18, 2021, according to total convenience store data from research firm IRI. The individually wrapped, single-serve cigar share has grown tremendously, led by brands like Swisher Sweets, Backwoods, cstoredecisions.com


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Category Management | Cigars

Dutch Masters, John Middleton and White Owl/ Game by Garcia y Vega. Tobacco industry veteran Steve Sandman, former president and chief operating officer of Republic Tobacco North America and now the principal of consultancy Laurevan Co. LLC in Wellington, Fla., is convinced the FDA means business. “I anticipate the outright banning of flavors fairly soon, with the only question to be determined is whether ‘sweet’ is a flavor or is allowed to remain on the market,” Sandman speculated. “Since flavored cigars are included in this ban,” said Buddy Gillespie, director of culinary & restaurant services for JBH Advisory Group in New York City, “a drop in sales is expected since many consumers are drawn to the sweetness and mildness of flavored cigars.” SHORTAGES & GROWTH

The proposed legislation isn’t the only change that c-stores must contend with. The COVID-19 pandemic created an inventory shortage of domestic and premium cigars due to manufacturing limitations. Many manufacturers have stopped making slower-selling items and are focusing production on their top-selling items and brands. “Due to the manufacturing constraints, many manufacturers have eliminated several price points,” noted Chad Owen, president of Chambers & Owen Inc., a wholesale c-store distributor based in Janesville, Wis. “The most popular ones for us are two-for-99-cents, three-for-$1.29 and save-on-two.” Jeremy Weiner, category director for cigars and premium products for Smoker Friendly in Boulder, Colo., sees the domestic cigar category continuing to enjoy strong growth for the rest of 2021, despite the product shortages. Smoker Friendly has over 160 retail stores across seven states that operate as tobacco stores, cigar lounges, liquor stores and fuel outlets.

fast facts: • As COVID-19 brought inventory issues, manufacturers and retailers have focused on stocking top-selling cigars. • FDA announced proposed flavor ban for cigars.

44

CSTORE DECISIONS •

June 2021

Cigar Sales Climb Throughout Pandemic Year Product Cigars

Dollar Sales

Unit Sales

Current

1-Year % Change

Current

1-Year % Change

$3.96 B

11.5%

2.44 B

4.0%

Source: IRI Market Advantage - TSV, Total U.S. Convenience data for the 52 weeks ending April 18, 2021

“We shrunk up our larger domestic cigar sets to give the category a full appearance,” he said. “Many consumers that now work at home have more opportunity to smoke throughout the day.” Smoker Friendly’s primary cigar consumers range from 21 to 40 years old in all demographics. Key to increasing cigar sales is dedicating more space to the category, Weiner suggested. “The consumers like variety in brands and flavors.” Window signs, shelf talkers and register display ads seem to work the best in his locations. “As far as promotions, we offer product buydowns funded by the manufacturers, with the savings passed on to the consumer,” Weiner added. Buydowns usually last 30 to 60 days. Smoker Friendly also offers a points-based loyalty program. Customers earn points for every dollar spent in the cigar category and can redeem them on most products sold in the store. FINDING A WAY AROUND

Veteran c-store operator Kizer Couch, who has owned and operated a Stop and Go in Bend, Ore., since 1998, said growth in cigar sales is coming from two directions — the first of which may soon change. “Cigars still have flavors that customers want, while cigarettes are banned from being flavored,” Couch noted. “The new taxes that have been implemented have taken the costs of cigarettes up so high that customers are finding cigars are a less-expensive alternative. Most of the people buying cigars from us are tradesmen who smoke them during work.” His primary cigar consumers continue to be males ages 25-50, and his top brands for the subcategory are Swisher and White Owl. Couch conceded that he is unsure how badly the proposed ban on flavored cigars will impact the marketplace. “It is my experience that any time the government takes away something people like,” he said, “private innovators will find a way around the rules to supply people with what they want.” CSD cstoredecisions.com


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An Open Letter to the Vaping Industry The Future of Disposable E-Cigarettes is in Your Hands

PREMARKET TOBACCO PRODUCT APPLICATION

To Wholesalers, Distributors, and Retailers: The future of the vaping category is in your hands. While the U.S. Food and Drug Administration (FDA) is engaged in a monumental review of e-cigarettes and the larger nicotine-delivery category through its Premarket Tobacco Product Application (PMTA) process, the decisions you make as major partners in the supply chain are pivotal to the survival of the overall electronic nicotine delivery systems (ENDS) category, and in ensuring that these products remain available for adult smokers and out of the hands of minors. The FDA has a Herculean task of reviewing the millions of PMTAs it has received leading up to the September 9, 2020 deadline for legally marketed products. Since that time, the market has seen the entry of a wide variety of ENDS products, especially within the disposables category – the vast majority of which are likely illegal if they were not on the market in August 2016 or subject to timely submitted PMTAs. Unfortunately, many of these products are not of the quality that customers expect; some are labeled with inaccurate information (including nicotine content), which could pose serious health hazards. Manufacturers of these fly-by-night disposables are simply not spending the time, resources, and dollars to comply with FDA requirements intended to protect the public health, including minors and other vulnerable population members.

The ENDS companies that step up and consciously commit to delivering high-quality products, complying with all federal, state, and local regulations, and paying all related fees and taxes find themselves victims to more opportunistic competitors. In that scenario, no one wins. The critical issue ultimately is quality. Manufacturers that choose to circumvent FDA requirements may bring subpar, illegal, and potentially dangerous tobacco products to the market - a disservice to the industry and adult smokers. So when doing your due diligence, make sure to evaluate your potential suppliers thoroughly. 1. What is their stance on youth marketing and age verification? 2. Are they committed to keeping ENDS out of the hands of minors? 3. How is their product made, and what quality control measures do they have to ensure that consumers are receiving consistent, accurately labeled, and quality products? 4. What is the overall experience that customers receive? 5. And what efforts are they putting forth to navigate the complex, multi-faceted requirements and standards laid out by the FDA and other regulatory bodies to align with the interests of public health? It’s a challenging, evolving, and fast-moving market. Low-quality devices and suppliers with unscrupulous marketing practices are collectively bringing down the industry. Legislators will continue to point to these bad actors when trying to ban flavors or vaping altogether. Please consider your decisions carefully. If you don’t, the future of this important product category -- and valuable option for current adult smokers -- may prove bleak. Sincerely, Niraj Patel President and CEO Bidi Vapor, LLC


Category Management | Vape

Vape Sees Gains Despite Restrictions Data shows c-store vape sales up double digits on the year, as new FDA PMTA guidance gives the industry hope after regulatory limbo. Isabelle Gustafson • Associate Editor


While no industry or category has been spared the effects of the pandemic, the tobacco category has faced a special set of challenges. For one, the Food and Drug Administration’s (FDA) Premarket Tobacco Application (PMTA). “The PMTA process has complicated the vapor world to another level beyond COVID that cigarettes didn’t see, smokeless didn’t see, cigars didn’t see,” said Circle K Tobacco Category Manager Kraig Knudsen, who oversees 387 of the Tempe, Ariz.-based chain’s stores. On May 20, the FDA posted a list of deemed new tobacco products for which PMTAs were submitted by the Sept. 9, 2020, deadline. The list includes more than 6 million products, most of which are electronic nicotine delivery systems (ENDS). Convenience retailers have long awaited guidance from the FDA, and this is a promising step forward for the industry and the e-cigarette subcategory. “Vapor is still a very strong subcategory of tobacco in the OTP sector. But it’s been weakened by the FDA’s process,” Knudsen said. “I think once the dust settles and the whole PMTA thing is behind us, they will then be in a position to regain some share.” In its announcement, the FDA noted the lists are not comprehensive, and retailers should still discuss with their suppliers the status of any tobacco product’s application or any product’s marketing authorization. For example, grandfathered products do not appear on the list, and tobacco products on the lists may be the subject of a warning letter. There is a one-year period for the FDA to determine what products might remain on the market pending FDA review. If a negative action is taken on an application before Sept. 9, 2021, the product must be removed from the market or risk FDA enforcement. If a positive action is issued, the product will be listed on the positive marketing orders page and can continue to be sold, according to the terms specified in the order letter. The agency’s Center for Tobacco Products (CTP) will hold a virtual meeting on June 11 with CTP Office of Science Director Matt Holman to improve public understanding of the policies and processes for tobacco product application review.


Customers at Nashville, Tenn.-based Tri Star Energy’s Twice Daily c-stores are looking for alternative tobacco products, according to Merchandising Manager Rick Staley. Nicotine pouches and vapor are both doing especially well for the retailer.

MOVING FORWARD

And at ARKO Corp.’s GPM InvestUltimately, regulation has stifled in- ments, the vape subcategory is doing novation in the category. “Even if you “extremely well,” said Kaitlyn Meara, could come out with the best thing GPM’s tobacco category manager, since sliced bread, you can’t even put adding that customers are looking it on the market until the FDA says for variety in nicotine delivery, flavors you can,” Knudsen said. and price points. The Richmond, Still, according to IRI Total U.S. Va.-based chain operates or supplies Convenience data, for the latest stores in 33 states and Washington, four weeks ending April 18, 2021, D.C., including both its 1,350 comelectronic smoking devices saw a pany-operated stores and approxi19.9% increase in dollar sales and a mately 1,600 dealer sites. 24.5% increase in unit sales. And for “Like in most other CPG catthe latest 52 weeks, the subcategory egories,” Meara said, “we saw an saw a 10.5% increase in dollar sales increase in baskets due to customers and a 17.7% increase in unit sales. making fewer trips.” Rick Staley, merchandising managNow that people are starting to er for Nashville, Tenn.-based Tri Star return to their routines and to more Energy’s Twice Daily stores, noted its traditional work environments, much numbers are overall in line with IRI’s. remains unknown about the way that “At Twice Daily, customers are look- consumers’ habits will shift moving ing for alternative tobacco products,” forward. he said. “We’ve noticed that nicotine Meara noted it’s extremely hard pouches and vapor are both doing to predict the tobacco category very well.” as a whole, but she’s “excited

E-cigarettes see sales spike despite regulatory hurdles Product Electronic Smoking Devices

Dollar Sales

Unit Sales

Current

1-Year % Change

Current

1-Year % Change

$5.2 B

10.5%

399 M

17.7%

about the innovation in the category with nicotine pouches and IQOS.” “Modern oral, lozenges, gums, toothpicks, beverages — things with nicotine that you never dreamt up that are now options,” Circle K’s Knudsen said. “I think once we get past (the regulatory hurdles), there will be some new innovation. It’s exciting. … I can only guess where the category would be if it had not hit this roadblock.” CSD

fast facts: • Despite the pandemic and regulatory hurdles, c-store vape was up 10.5% in dollar sales and 17.7% in unit sales for the latest 52 weeks, according to IRI, plus 19.9% in dollar sales and 24.5% in unit sales for the latest four weeks. • On May 20, the FDA released a list of deemed new tobacco products for which PMTAs were submitted by the Sept. 9, 2020, deadline, which includes more than 6 million products. • Regulatory clarity is expected to lead to increased innovation for the subcategory.

Source: IRI Market Advantage - TSV, Total U.S. Convenience data for the 52 weeks ending April 18, 2021

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CSTORE DECISIONS •

June 2021

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Category Management | Smokeless

Modern Oral Nicotine Sales B

Smokeless tobacco

Smokeless category sales have climbed at c-stores

enjoyed strong sales

nicotine segment lifting the category. Retailers are

during the pandemic,

optimistic about the category in the year ahead, but

but can the category maintain the momentum in 2021? Erin Del Conte • Executive Editor

during the COVID-19 pandemic, with the modern oral

also eyeing both regulatory and economic headwinds for the remainder of 2021. Sales of smokeless tobacco rang in at $8.30 billion, up 6.4% for the 52 weeks ending April 18, 2021, according to market research firm IRI’s total convenience store data. Sales were led by the spitless segment, which saw a 54.1% rise in dollar sales and a 58.3.% rise in unit sales for the period. Chewing tobacco/snuff, by contrast, saw dollar sales tick up 1.4% and unit sales fall by 7.6%. “Smokeless and other tobacco consumers are continuing to evolve,” said Kraig Knudsen, tobacco category manager for Circle K. Circle K’s parent company, Couche-Tard, operates more than 14,200 stores in 26 countries and territories. “Twenty years ago,


es Bolster Smokeless Segment

these subcategories were dominated by loose smokeless tobacco products. These were basically your only options if you did not want to light up. As consumers started using more pouch products, it opened the door for their acceptance to snus.” Today, Circle K is seeing success with modern oral products, in addition to gums and lozenges. While sales of traditional smokeless items are currently “relatively flat,” for the chain, modern oral is trending up, a trend Knudsen expects will continue to grow over the next few years. “The consumer has shifted from a tobacco consumer to a nicotine consumer,” Knudsen said. “The two largest innovations to this industry, vapor and modern oral, are nicotine products and do not contain actual tobacco. It is clear that this is the new desire of the consumer.” Traditional smokeless items are still key for the category, “but it is exciting to see the rapid adoption of the new modern oral products,” he said. Beaverton, Ore.-based Plaid Pantry has been watching the modern oral nicotine trend as well, and in recent years

has strategically expanded space for the growing segment. “(We’re) seeing a great demand for modern oral nicotine with brands like ZYN, ON! and Velo, with trends north of 40% increases from prior years,” noted Jon Manuyag, director of marketing for Plaid Pantry, which operates 108 c-stores in the Pacific Northwest. He sees the customer base for the segment increasing with each passing year. “Combustible, vape and moist snuff chew users are trying this segment,” he said. Expanding the category, he added, is proving a successful strategy in engaging customers, which is key given that more regulations on combustible cigarettes and vape appear to be on the horizon. On the moist snuff front, sales at Plaid Pantry stores have continued to slowly decline. Smokeless chew is down 6.2% this year for the chain, which Manuyag attributed to a large shift to the modern nicotine space. “The sales tailwinds are coming from innovation with tobaccoless nicotine pouches (modern nicotine), such as ZYN, ON!, etc.,” he said.


Category Management | Smokeless

Spitless tobacco sales Strengthen smokEless category Dollar Share of Category

Dollar Sales

Product

Unit Sales

Current

1-Year % Change

Current

1-Year % Change

Current

1-Year % Change

Smokeless Tobacco

$8.3 B

6.4%

100.0%

0.0%

1.39 B

-1.0%

Chewing Tobacco/Snuff

$7.16 B

1.4%

86.3%

-4.23%

1.17 B

-7.6%

Spitless Tobacco

$1.13 B

54.1%

13.7%

4.23%

224 M

58.3%

Source: IRI Market Advantage - TSV, Total U.S. Convenience data for the 52 weeks ending April 18, 2021

Smokeless customers at Plaid Pantry are also gravitating toward multipack promotions. “We are seeing great results in multipack and full roll purchases in these segments,” Manuyag said. “We continue to look at customer saving promotions that reward the customer on multipack purchases or full rolls. The take rate on these promotions is averaging 40-45% and with some promotions even higher.” REGULATORY SNAPSHOT

Potential menthol and flavor bans remain a major headwind at local, state and federal levels. In New York, for example, c-store retailers are currently fighting proposed legislation that seeks to ban the sale of all flavored tobacco in the state, including flavored smokeless tobacco. “Our economic analysis shows that passage would cost the state $3.4 billion in lost tax revenue over the next decade, cost store owners nearly $500 million a year in lost sales and eliminate 1,200 jobs in retail and related industries,” noted Jim Calvin, president, New York Association of Convenience Stores (NYACS). Meanwhile on the federal level, the Food and Drug Administration (FDA) remains “the great unknown,” Circle K’s Knudsen noted. “They hold the power in determining what products will be the winners going forward. The choice to regulate or not to regulate lies with them. As retailers, we just hope that the FDA will be transparent and give guidance so 54

CSTORE DECISIONS •

June 2021

that we can know what direction they are going.” In April, the FDA announced plans to propose a federal ban on menthol cigarettes and flavored cigars within the next year, but there was no mention of smokeless tobacco in its announcement. “If the FDA decides to ban flavors in cigars, it would be assumed that their next move would be against flavors such as wintergreen or mint in smokeless products. It would be difficult for them to regulate one area and not the other,” Knudsen predicted. For Knudsen, the key question is, “will any additional regulation come from the FDA and be based on science, or will it come from pressure by legislators that have their own agenda?” But NYACS’ Calvin isn’t overly concerned about FDA regulation of smokeless for the time being. “Since there was virtually no mention of smokeless in the FDA’s announcement, I assume that menthol cigarettes and flavored cigars are their primary targets for the foreseeable future,” he said. At Plaid Pantry, Manuyag continues to monitor local and state-level flavor ban proposals, as well as the FDA’s plans for a federal menthol ban. “All could impact traffic coming into our stores,” he said. If FDA does ban flavored cigars and menthol cigarettes, he sees it as potentially benefiting the smokeless segment. “A lot more users will shift to this segment, especially in the modern nicotine pouch space,” Manuyag said. “Or the menthol cigarette users

will switch to a lighter non-flavored combustible cigarette.” LOOKING AHEAD

Manuyag expects overall other tobacco products to continue to trend well at Plaid Pantry this year, with segments such as modern nicotine and cigars helping to offset declines in moist snuff. Meanwhile, at Circle K, Knudsen predicts smokeless category sales to roll in flat for the remainder of 2021, but he sees modern oral products continuing to grow and take over a larger share of the category. “As workers return to office environments, they will once again be faced with smoking restrictions. This will open the door for more frequent usage of smoke-free alternatives,” he said. Still, last year’s robust sales are likely to be hard to beat in 2021. “We are lapsing a very strong comp year,” Knudsen explained. “Last March started strong tobacco sales as consumers started pantry loading. From March 2020 to about February 2021, individual consumption escalated.“ Now, as customers are getting vaccinated and beginning to venture out to social events again, consumption levels are starting to decrease, which Knudsen expects to continue over the next few months. “Nobody anticipated the strength that the whole tobacco industry experienced over the last 12 months,” Knudsen said. “It will be difficult to keep up this same momentum.” CSD

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Category Management | Tobacco Accessories

Lighter Sales Blazing While overall tobacco accessories sales have flattened compared to early pandemic boosts, lighters are still in high demand at c-stores. Isabelle Gustafson • Associate Editor


Pandemic lockdowns led to customers stocking up on their favorite products wherever and whenever they could find them, and the data reflects this: Smoking accessories saw a massive 23.5% increase in dollar sales and a 16.3% increase in unit sales for the latest 52 weeks ending April 18, 2021, according to IRI Total U.S. Convenience data. Lighters specifically saw a 6.1% rise in dollar sales for the period. While total store trips were down, basket sizes were up. Plus, stay-at-home orders meant those who smoke — tobacco or cannabis — had fewer restrictions for doing so. Ultimately, it proved a perfect storm for the lighter subcategory. Sayre, Pa.-based Dandy Mini Mart’s c-stores were up about 38% in smoking accessories for the year, confirmed Vice President of Food Service and Merchandising Dyson Williams, who attributed increases to an overall shift in consumer habits. “We saw cigarette sales rise during the early part of the pandemic,” he said. “Also, people wanting to make less trips to specialty stores, etc.” The c-store chain operates 65 stores in Pennsylvania and New York. Meanwhile, Indiana-based Good Oil Co., which operates 15 Good to Go stores in Indiana and one in Illinois, saw an even bigger early increase in accessories sales — 41.48% — according to Mike Jones, the c-store chain’s director of marketing and foodservice. Good to Go recently made all of its SKUs available for delivery through Vroom Delivery, including tobacco and smoking accessories products. And while, for the latest four weeks ending April 18, 2021, smoking accessories began to flatten, up just 1.8% in dollar sales and down 2.6% in unit sales, lighters specifically saw a dollar sales rise of 31.1% for the same four weeks, with unit sales up 19.7%. What’s more, many c-stores are still reporting strong tobacco accessories sales. Good to Go, for one, shows a 16% increase for the first four months of 2021. MERCHANDISING OPPORTUNITY

At Springfield, Mo.-based Gier Oil’s Eagle Stop Stores, with more than 50 c-store locations in the state, smoking accessories are going strong, thanks to an expansion of the subcategory in recent months. “Lighters are doing great,” said Nick Lepper, Eagle Stop’s category director. “We have expanded from

the standard, plastic spark-wheel lighter into electronic and torch-style lighters — single, double and triple flames.” Lepper took over as category director at the start of the year. With the entire tobacco category, he noted, the chain’s biggest challenges are organization and space — for lighters, counterspace in particular is always a concern, he said. “In an effort to maintain a clean look for the counter and offer consumer-demanded products, I have worked with our partners to acquire racks for the stores that will merchandise all styles in the incremental space,” Lepper said. With lighters and beyond, opportunity still exists for c-stores to cater to legal cannabis smokers. Recreational cannabis is now legal in 17 states and Washington, D.C. And a number of others have decriminalized its use. According to the Pew Research Center, this means 43% of U.S. adults now live in a place that has legalized cannabis for recreational use. And CivicScience survey data from the first quarter of 2021 shows that nearly 70% of U.S. adults (ages 21 or older) would support the legalization of marijuana in their respective states. Plus, Euromonitor International estimates more than 360% growth of the sector by 2025, totaling more than $53 billion in sales.

fast facts: •

Smoking accessories saw a 23.5% increase in dollar sales and a 16.3% increase in unit sales for the latest 52 weeks ending April 18, 2021, according to IRI Total U.S. Convenience data. Sales of smoking accessories have begun to flatten, up just 1.8% in dollar sales and down 2.6% in unit sales for the latest four weeks. There’s opportunity to cater to the cannabis consumer, but it depends heavily on the area and the customer base.


Category Management | Tobacco Accessories

Smoking accessories benefit from stay-at-home orders, specialty shops closures Product

Dollar Sales, 52 weeks

Unit Sales, 52 weeks

Dollar Sales, 4 weeks

Unit Sales, 4 weeks

Current

1-Year % Change

Current

1-Year % Change

Current

1-Year % Change

Current

1-Year % Change

Smoking Accessories

$388 M

23.5%

199 M

16.3%

$31.8 M

1.8%

16.0 M

-2.6%

Lighters

$612 M

6.1%

333 M

-1.0%

$52.2 M

31.1%

27.1 M

19.7%

Source: IRI Market Advantage - TSV, Total U.S. Convenience data for the 52 weeks ending April 18, 2021

58

CSTORE DECISIONS •

June 2021

Lighters are doing great. We have expanded from the standard, plastic spark-wheel lighter into electronic and torch-style lighters — single, double and triple flames.

Some stores, like Chicago-based Foxtrot, are already offering modern, cannabis-related accessories like a hand-blown glass smoking pipe, listed in the Lifestyle section of the chain’s website, which “offers a sophisticated, playful and smooth smoking experience.” But, like all things, with limited space, it comes down to knowing your customer base. For many c-stores, traditional lighters remain the top sellers. CSD

- Nick Lepper, category director for Gier Oil’s Eagle Stop Stores

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Category Management Column | Cannabis

GET PREPARED FOR THE POSSIBILITY OF SELLING CANNABIS Growing the CBD category now can put c-stores in prime position to capture cannabis sales if the product becomes legal. Don Burke • MSA

The eventual possibility of selling cannabis is highly appealing to many convenience store retailers. With typical declines in tobacco sales, more fuel-efficient and electric cars impacting fuel volume, and the pandemic impacting foot traffic, this opportunity cannot come fast enough. Currently, the sale of cannabis is fully legal in 17 states and Washington, D.C., and in another 32 states has been decriminalized, meaning there is no possibility of arrest for possessing a small amount of cannabis. Even better, the number of states that are loosening their cannabis laws keeps growing. But none of this matters as convenience retailers will not be able to sell cannabis until it becomes legal at the federal level. There are encouraging signs that the current administration is interested in making this happen, but it’s unlikely to happen soon. So what is the convenience retailer to do? 60

CSTORE DECISIONS •

June 2021

START WITH CBD

One opportunity is to position your outlet as a destination for currently legal cannabidiol (CBD) products produced from hemp. Management Science Associates’ (MSA) research has shown that the cannabis consumer is very similar in profile to the CBD consumer, so building a presence among this target group now with CBD will likely yield stronger cannabis sales when the time comes. Notably, the CBD/cannabis consumer is also very similar to the typical convenience store shopper — younger, male, and either in a blue-collar occupation or a student, making

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the task of appealing to this audience all that much easier. It’s also interesting that the top reasons for using cannabis are very similar to the top reasons for using CBD — mostly for the release of pain, to help with stress and anxiety, and for relaxation. Developing your location as a destination for CBD will keep this consumer coming back when cannabis is available for the very reasons they will be shopping your store today. If you are wondering what type of CBD items to stock that may also appeal to the cannabis purchaser, note the graphic showing the preferred methods of consuming cannabis on the next page.

Why Use Cannabis? (SLIDE 1)

ay n D o i at lada N he ic M

IN

R NO HO

F O

Why Use Cannabis?

© 2020 Management Source: 2020 Management Science Associates Inc. Science Associates, Inc. All rights reserved.

1

Source: Survey data from surveys conducted in 2019-2020

al

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61


Category Management Column | Cannabis

cannabis usage forms

Cannabis Usage Forms (SLIDE 2)

§ Smoking cannabis is the most popular form of usage, followed by Edibles and CBD.

Source: 2020 Management Science Associates Inc. © 2020 Management Science Associates, Inc. All rights reserved. Source: Survey data from surveys conducted in 2019-2020

The good news here is that many of these product forms are also some of the more popular forms of CBD. Smoking cannabis is the preferred method of consumption (flower/bud and pre-roll), and one of the faster-growing CBD items in the convenience channel today is the rolled CBD cigarette. The top-selling CBD convenience

2

item is the gummy, and this product form is also one of the top product types in the cannabis edible category. Further support for building your CBD business today, in preparation for the legalization of cannabis, is that in those states where cannabis is fully legal, CBD usage levels are also stronger. The stronger usage levels of both cannabis and CBD in states where cannabis is fully (SLIDE 3) legal suggests convenience retailers that build a strong CBD business today will not only find that their CBD business expands, but that they already have the right consumer audience for significant cannabis sales when it does become legal at the federal level.

CBD &&Cannabis Usageusage by Stateby Cannabis cBD Cannabis stateLegality cannabis legality •

CBD and Cannabis usage are highest in fully legal cannabis states.

Source: 2020 Management Science Associates© 2020 Inc.Management Science Associates, Inc. All rights reserved.

Source: Survey data from surveys conducted in 2019-2020

62

CSTORE DECISIONS •

June 2021

Don Burke is the senior vice president of Management Science Associates (MSA), a leading-edge data management and analytics firm. Burke has 20-plus years of CPG experience working across the cannabis, tobacco, grocery, confectionary and beverage categories. He can 3 be reached at DBurke@msa.com. cstoredecisions.com


Category Management Column | CBD

THE CBD OPPORTUNITY:

CBD IN C-STORES Targeting the wellness customer can help convenience stores grow the CBD category. Mike Kostyo • Datassential

When you think about ways you can meet your customers’ health needs, you may immediately think of offering options like natural foods, clean labels, fresh options and products that are low in sugar or sodium — “health foods,” in other words, many of which are focused on physical health and weight loss. But for the majority of consumers today, emotional and mental health are top of mind, even above physical and nutritional health goals. As consumers continue to prioritize their emotional and mental health, c-stores have an opportunity to meet those needs with functional products, including cannabidiol (CBD) products. For our “New Foundations in Health Keynote Report,” Datassential recently surveyed consumers on which attributes they consider to be important to their overall well-being. According to the report, nearly two-thirds — 65% — said that emotional and mental health were important to overall well-being. That was the top answer, scoring higher than family relationships, physical health, financial health, and what consumers eat and drink. And that number increased to 70% of consumers in the Gen X generation. Clearly there is an opportunity to meet these well-being needs, particularly as consumers start driving and traveling again. Getting back to “normal” is bound to add some new stresses to their lives, on top of the lingering impacts of an already stressful year.

MARKETING CBD

We also know that consumers are open to purchasing cannabis and cannabis-derived products like CBD at c-stores. According to our research, 70% of consumers said they are extremely or somewhat likely to purchase these products at c-stores. But when you look at your CBD offerings, is it clear to your customer that your product mix is designed to meet these need states? To drive home the message, take advantage of manufacturer and distributor marketing materials and signage that showcase clear functional benefits to the customer, including terminology like “stress reducing” and “relaxing.” You may also consider separating CBD products that are clearly designed for the wellness consumer from those that have more “in-yourface” branding. There are opportunities for both CBD supplements and CBDinfused food products. Consumers ranked “eating right” far higher than “taking vitamins and supplements” when asked what they believe contributes most to a healthy lifestyle, so functional CBD food

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products aimed at emotional and mental well-being can resonate with consumers. A CBD drink or chocolate bar aimed at reducing stress can be a “self care” opportunity for consumers and prompt an impulse purchase. It can also be an easy way for them to incorporate functional options into their regular routine: 82% of consumers said they believe functional beverages can help them stay healthy without having to radically change their diet, according to Datassential’s “Functional Beverages Report.” Meanwhile, though consumers prefer to manage their health through food, 63% of consumers reported that they take daily vitamins or supplements. When marketing CBD supplements, consider options that are “natural” or “clean label,” as 83% of consumers noted they are at least somewhat interested in cleanlabel supplements. The lesson is clear: Many of your customers are prioritizing their mental and emotional well-being today. Now it’s time to meet those needs. Mike Kostyo is the resident trendologist and senior managing editor at Datassential, a market research company that helps food & beverage companies of all sizes and segments innovate, sell and plan for the future, backed by the best data in the industry. He can be reached at mike@datassential.com. June 2021 • CSTORE DECISIONS

63


Foodservice | F o o d s e r v i c e 1 0 1

FOCUS ON FOODSERVICE

Reaps Big Rewards Retailers who are stepping up their game when it comes to their pizza, chicken and roller grill programs are significantly bettering their bottom lines. Marilyn Odesser-Torpey • Associate Editor 64

CSTORE DECISIONS •

June 2021

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Foodservice | Foodservice 101

Tried-and-true c-store foodservice staples like roller grill hot dogs, pizza slices and chicken tenders are an ideal base on which to build an extensive high-quality food offering. Clark’s Pump-N-Shop, which has 68 locations in Kentucky, Ohio, West Virginia and Florida, has long been a foodservice destination with its successful chicken and roller grill programs. As of last April, the chain also added pizza to its meal mix at one of the stores, and the results have been even better than expected, said Jessica Russell, Pump-N-Shop’s food service director. Just as important as dollar sales, the newly available pies have grown overall foodservice sales instead of cannibalizing from the other offerings, she noted. Even the stores’ morning daypart, their highest volume time of day, increased with the introduction of a breakfast pizza.

Clark’s Pump-N-Shop added pizza to one of its stores last April and plans to roll out the program to around 30 additional stores. 66

CSTORE DECISIONS •

June 2021

Pizza, both whole pies and slices, continues to drive foodservice sales at c-stores nationwide.

PIZZA SLICES & PIES

Pump-N-Shop offers two crust options, one of which is gluten free, and creates specialty pizzas such as the buffalo chicken, bacon and ranch and barbecue to showcase the variety of topping options. A hot case with a digital menu on top is dedicated to the slices for easy grab and go. Russell noted that rollout of the program is set to begin to around 30 additional stores. Pizza is a staple at Pilot Flying J convenience stores and travel centers, which includes 750 locations in 44 states and six Canadian provinces. According to Jamie King, senior director of food and beverage, “pizza sales are driving incremental sales growth over prior years.” In addition to traditional toppings, the stores offer a constant rotation of seasonal and specialty pies such as chicken, bacon and ranch, barbecue brisket and cordon bleu. Those toppings are built on a signature, hand-stretched crust that is “hand-roped” 46 times “to create the perfect pizza canvas,” King pointed out. Slices are the bestsellers. “We promote our pizza in multiple ways, including through special offers on the myRewards Plus app and signage inside the stores,” he said. Until the beginning of this year, FriendShip Food Stores in Ohio was best known as a pizza

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Foodservice | Foodservice 101

fast facts: • C-stores see success with both pizza slices and whole pizzas. • Chicken’s versatility allows it to stand alone as a meal or extend to salads, pizza toppings and sandwiches. •R oller grills can entice customers with a range of limited-time offers and a variety of flavors across a robust offering of hot dogs, sausages and taquitos.

Pilot Flying J recently introduced two new fried chicken sandwiches to its menus, in addition to a Greek Chicken Wrap.

slice purveyor, but now the company is focused on growing whole pie sales. Of its 28 total stores, 20 serve pizza. “We’ve more than quadrupled our pizza sales, particularly whole pies,” explained Kirk Matthews, vice president of foodservice and marketing for FriendShip. Made with a proprietary sauce and cheese, 16inch, one-topping pies are available at an everyday value price of $9.99. The company also creates clever promotions such as a $5 Pizza Day to incentivize loyalty members and Tax Day prices of $4.15 and $5.17 on the dates tax returns are due this year.

Thirty of Clark’s Pump-N-Shop locations feature two roller grills each: one for hot dogs and one for taquitos.

68

CSTORE DECISIONS •

June 2021

But just because whole pie sales are soaring does not mean slice sales are suffering. According to Matthews, that part of the business is growing as well, particularly with promotions like a $2.99 price or two for $5 specials. CHICKEN & ROLLER GRILL

Chicken is a huge part of the foodservice offering at Pilot Flying J, not only in its own category, but also across the pizza, salad and sandwich categories, King said. It is the star of a slate of items introduced in May including Southern Chicken and Spicy Chicken Sandwiches and a Greek Chicken Wrap. At its 20 stores with kitchens, FriendShip entices customers with tenders that are 35% larger than average, fresh never frozen, store-battered and breaded at value prices, Matthews said. Available at an everyday price of $9.99, the nine-piece meal with battered and fried jojo potatoes is the top seller. Fresh, store-breaded chicken has been a strong seller at Clark’s Pump-N-Shop for the past 12 years, Russell stated. The 13 stores that showcase the chicken in hot cases right by the checkout areas have a “great lunch volume,” with tenders leading the sales. Roller grill continues to present a host of meal and snack options at Pump-N-Shop. Available in 30 of the stores (and growing, according to Russell), there are two grills in each location — one for hot dogs and the other for taquitos. Taquitos are the best movers, beating out hot dogs 3:1. Four varieties of each are featured on the roller grills every day. Limited-time offer (LTO) items are promoted with vendor participation. CSD

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C

IC S S LA

Y C I P &S

Now this is how you compete in the chicken sandwich wars. Thick, juicy, whole breast fillets with the hand-breaded appearance your customers are craving. Their championship taste takes just 6 minutes from frozen to ready. Want to enter the ring? Try the new c-store heavyweight in classic and spicy. Visit ChickenChampions.com © Brakebush Brothers, Inc. 2021


Technology | POS

Contactless Payment Comes to the

Forefront From EMV-enabled pumps to mobile wallets and frictionless checkout, contactless payments offer retailers and customers safety and convenience. Erin Del Conte • Executive Editor

The pandemic brought major changes to c-store retailers, especially when it came to the checkout experience. “The most notable payment change resulting from the COVID-19 pandemic has been a much more rapid deployment of contactless payments than was expected prior to the pandemic,” said Perry Kramer, managing partner, Retail Consulting Partners. “Contactless payments include two major categories — contactless credit cards and mobile wallets stored in consumers’ phones or other personal devices.” The big driver toward contactless payments for cstores has been a “dramatic focus on safety” during the pandemic, Kramer pointed out. On the EMV front, retailers were also working to 70

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meet the now-passed April 2021 deadline for EMV compliance at the pump ahead of the liability shift. “The contactless EMV transaction is a win-win for retailers and consumers,” Kramer said. “When implemented correctly, the customer does not need to sign anything (paper or the terminal). This can cut the payment process time in half, be perceived as being safer and reduce chargebacks.” Retail Consulting Partners’ “2021 POS & Customer Engagement Report” found 78% of retailers have implemented the hardware and software to enable EMV transactions. The survey further found that contactless payments are becoming an expectation of consumers. Contactless payments accounted for less than 2% of transactions in 2018 and have grown to almost 80% today in segments such as grocery and drugstores. cstoredecisions.com


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Technology | POS

“This can be seen in the New York City metro system, Customers can also link to their Advantage Card in the which reported over 1 million transactions in the first 69 Grabango app to take advantage of various promotions. days that it enabled contactless payments in a small sub“Amazon Go and the pandemic have accelerated innoset of pilot locations,” Kramer said. vation around alternative payment and checkout soluPittsburgh-based GetGo Café+Market is seeing custions. With Grabango, we were able to pilot and retrofit tomer demand for contactless payments at its c-stores. an existing store vs. building a store around the technol“Customers want to get in and out of our GetGo ogy,” Phatak said. “Allowing customers to skip the line locations fast and are increasingly more open-minded and check out themselves saves them time and also helps about self-checkout and mobile app checkout experius redeploy that cashier labor to other value-added tasks ences,” said Rug Phatak, chief of staff and senior director around the store: cleaning, sanitizing, stocking and assistof marketing for GetGo, which operates more than 260 ing in Café+Market MTO kitchens.” locations in Pennsylvania, Ohio, West Virginia, Maryland GetGo is currently exploring the possibility of expandand Indiana. “The pandemic and the desire to reduce ing the pilot. touches and face-to-face interactions have accelerated Saving customers time, reducing touches and reallocatthose trends.” ing labor as needed make payment innovation a valuable GetGo recently added new Invenco G6 and G7 Payconsideration for retailers, Phatak noted. “All these techat-Pump terminals, iNFX retail microservices and cloud nologies integrate with our current point-of-sale system services management platform at all existing locations to and allow us to leverage our best-in-class fuelperks+ address outdoor EMV, while also offering a more robust loyalty program.” media experience at the pump. “EMV compliance with the liability shifting to us as the LOOKING AHEAD retailer was certainly an important consideration, but Another significant trend for retailers to watch is growmore important was providing customers with even ing competitiveness in the payment processor industry. more security for their transactions,” Phatak said. “What “Many of the traditional processors have been forced we liked about the Invenco solution was that it not only to improve their service and adjust their fees to react to provided EMV compliance, but also enabled us to display newcomers like Aurus and PayPal, who have very comdynamic and rich video content vs. static signage and petitive offerings built on new technologies,” Kramer said. opens the door for future innovation and integration with “They can offer more competitive pricing because they other payments and programs.” are not supporting many of the legacy systems that the The new touchscreens support future integration of longtime players have.” touchless payment for contactless payments — like Apple What’s more, many retailers are coming up to the life Pay, mobile wallet credit cards and Google Pay at the span of their payment terminal hardware, making it likely pumps — which is expected to be added later this summer. these retailers will be reevaluating their existing payment “This technology is already enabled inside the store and vendors in the next few years. is becoming increasingly popular as customers reduce Indeed, Retail Consulting Partners’ “2021 POS & Customtouches and rely more on their smartphones and smarter Engagement Report” found 41% of retailers indicated watches to act as virtual wallets,” Phatak said. “Advanthat their payment terminal hardware was more than five tagePay is another form of payment customers can alyears old. “These terminals traditionally have a life expecready use at the pump; by securely linking their checking tancy of six to seven years,” Kramer noted. “The survey account to our Advantage Card loyalty card, customers supports this as it also shows that 48% of retailers anticipate can unlock an additional fuel discount of five to 30 cents replacing their payment terminals in the next three years.” per gallon on every fill-up, every day.” Surprisingly, a former burning-issue topic — payment security — dropped down the chart in terms of its imporFRICTIONLESS CHECKOUT tance to retailers responding to the survey. Only 15% of GetGo is also taking contactless a step further, piloting retailers responding to the survey ranked this as one of Grabango autonomous checkout technology at one of its their top three priorities, Kramer pointed out. Pittsburgh-area locations. “I would suggest that the maturity of the payment“Grabango technology and cameras monitor what cusprocessing solutions in the market have provided retailtomers pick up and put down to maintain an active virtual ers with a significant level of comfort around payment basket,” Phatak explained. “When a customer is ready to security,” he said. “COVID has forced retailers/c-stores to check out, they scan the code in the Grabango app, payfocus attention on more flexible order fulfillment, includment is processed in a matter of seconds, and customers ing digital integration, which was also another big reason can skip the line and walk out the door.” payment (security) took a bit of a dip.” CSD 72

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June 2021

cstoredecisions.com


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Technology Column | Loyalty

WHERE DO LOYALTY PROGRAMS

GO FROM HERE? The COVID-19 pandemic highlighted some areas where c-store loyalty initiatives may need to evolve to keep pace with competion from other channels. Frank Beard • Director of Safe Shop/Special Products

Few companies were as prepared for the COVID-19 pandemic as Domino’s Pizza. Having built its digitally enabled, off-premise infrastructure for nearly a decade, the company was positioned to thrive in a climate where many customers were stuck at home. The Domino’s app isn’t just an add-on to the customer experience. For many, it is the customer experience. Beginning with the iPhone in 2011 and Android in 2012, Domino’s transitioned from a business reliant on phone calls to a true e-commerce leader. Domino’s digital sales were near 30% of total sales by the end of 2011, according to Bloomberg. Prior to the pandemic, they had risen to near 70%, per CNBC News. Convenience retailers pursued a much different mobile strategy in the years leading up to the pandemic. Rather than emphasizing digital ordering and off-premises sales, their apps were typically designed around discount marketing and loyalty programs — strategies to encourage in-store visits. That made it difficult to serve customers, who were suddenly fearful about visiting their favorite stores due to the pandemic. Now that we’re beginning to move on from the COVID-19 pandemic, this raises two questions: Should retailers revisit their mobile strategy 74

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June 2021

and consider adding new functionality to their apps, and how might loyalty programs evolve in response to the events of this past year? Let’s examine a few perspectives. MOVING APPS FORWARD

The pandemic reinforced the importance of understanding customers and their behaviors, explained Daniel Kahan, the loyalty lead at W. Capra Consulting Group. “We’re coming back to the same conversation we had before the pandemic about the currency of data,” said Kahan. “When the pandemic hit and consumers were no longer coming to the stores in droves, many retailers lacked an understanding of who those customers were — and their purchase patterns. Some retailers even lacked ways to reach out to them.” Kahan suggested that loyalty strategies must be based on actual consumer data rather than blindly pursuing mobile payment strategies or other drivers, such as consumer packaged goods (CPG) discounts. By understanding their needs and behaviors, retailers can identify specific tactics and techniques that can lead to a return on their investments.

cstoredecisions.com


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The Impact of Delivery and Online Sales: How do we reach new food customers?

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JUNE 9 /

How to Create a Next-Generation Store. Everything from EMV compliance to foodservice is forcing retailers to innovate and future-proof their stores to maximize revenue streams.

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Technology Column | Loyalty

Maybe the answer isn’t always a mobile app. The “app or bust” mentality can even be problematic in some circumstances, Kahan noted. “A mobile app is expensive real estate on a consumer’s device,” he said. “If you don’t get it right the first time, they will not go back to using it. Research confirms this. Consider alternatives like progressive web apps, where you’re still offering a digital experience, but you’re not necessarily putting the same demand on the consumer. You can collect data and ultimately use that to create a more immersive experience.” LOYALTY AS THE OUTCOME

View loyalty as an outcome, not a strategy. Kevin Rice, the chief marketing officer at Hathaway, a digital growth agency, recalled the way Apple’s famous “Mac versus PC” commercials spoke to the emotional rather than rational side of loyalty. Many readers will likely remember those. Justin Long played the role of the Mac and presented a cool, chill and suave contrast to John Hodgman’s stuffy, dated and terribly uncool PC character. “Despite PCs being cheaper and often discounted, customers were willing to pay full price for Apple’s products,” said Rice. “They simply aligned better with their values and who they aspired to be. There’s less elasticity to that approach. If you have a strong emotional connection, customers are less likely to switch brands than when the relationship is based solely on discounts.” Rice sees an opportunity to strategically use discounts as a way to show that loyalty goes both ways. Personalized offers can help. Although he argues true personalization is rare at the present time — and may require a lot of manpower along with a lengthy organizational journey — retailers are getting closer as they’re becoming more sophisticated with segmentation. “Ultimately, it’s about delineating between an explicit rewards program versus loyalty as an outcome,” said Rice. “The programs that everyone gets to be part of are great enrollment drivers. From there, it’s the below-the-line tactics that drive loyalty.” CREATING YOUR STORY

What Domino’s did was contextually relevant for them, but it may not be the answer for everyone. Retailers like Casey’s do appear to be on a similar journey. For the quarter ending Dec. 31, 2020, Casey’s reported that 55% of prepared food orders came from their website and mobile app. But they’re also a unique company, and it’s doubtful that the average convenience store is as well-positioned to thrive on mobile ordering. 76

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June 2021

Speaking more broadly, where might this industry’s equivalent of the “Domino’s story” come from? One interesting opportunity may come from subscription programs. According to Saurabh Swarup, general manager of global marketing technology company Liquid Barcodes, it makes sense to both the customer and the retailer. Imagine a coffee customer in a hurry on his work commute. Rather than standing in line for his usual beverage, he might instead grab it and bypass the line. “It’s only a matter of time before you see subscription programs making their way into different aspects of the convenience store business,” said Swarup. “Anything and everything that can be on subscriptions will be.” Beyond the obvious customer benefits, subscriptions also provide retailers with clarity from an accounting and reporting perspective. Brands know how many customers are subscribed and at which price points. Rather than struggling to define incremental sales uplift, retailers have clear results. Perhaps even more interesting, subscription programs present clear opportunities for upselling — a tactic that has been traditionally difficult in convenience retail. “The average American might visit a car wash six or seven times per year,” explained Swarup, “but a subscription customer might visit three or four times per month. Now imagine that a customer goes to his favorite car wash, and the system asks if he wants to upgrade from the bronze subscription to a one-time gold wash for only $2. It may not mean much to him, but it just helped drive $2 for that retailer right then and there.” Swarup recalled a successful upselling competition that took place during a previous role at fast-food corporation Yum! Brands. When a call center incentivized employees to upsell extra cheese on pizza orders, the team immediately rallied behind it since they received small kickbacks whenever they were successful. The cost of the payouts — along with the cost of the extra cheese — was minimal compared to the small upcharge that customers paid. “We were still making around $1.60 on every extra cheese order, and all we had to do was ask,” said Swarup. “That’s the power of upselling.” Frank Beard is the director of the store safety certification program Safe Shop and the director of special projects at CStore Decisions. Follow Frank on Twitter (@frankbeard) or LinkedIn (Linkedin.com/in/frankbeard). Learn more about Safe Shop at Safeshopassured.com.

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

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PRODUCTShowcase

Chicken Sausage Crumbles Brakebush’s new Chicken Breakfast Sausage Crumbles, with a hint of sage, are ideal for breakfast pizzas, breakfast burritos, biscuits and gravy, and more. The Italian-Style and Spicy Italian Chicken Sausage Crumbles are on-trend options crafted with authentic Italian sausage flavor. Operators can add these new Chicken Sausage Crumbles to any variety of pizza or anywhere savory Italian flavor can thrive, like calzones and pastas. These new Chicken Sausage Crumbles are fully cooked, gluten free and lower in fat and calories compared to pork sausage.

Fast-Acting, CalorieFree Caffeine Tablet

Brakebush Brothers Inc.

www.brakebush.com

Hybrid Designer Lighter Series

Jet-Alert — the fast-acting, caloriefree caffeine tablet — is found in over 40,000 retailers throughout the U.S. Offered in two strengths, the Jet-Alert 100-milligram tablet is unique to the market, as the more common tablet is 200 milligrams. The 100-milligram tablet drives consumer trial by appealing to the new caffeine user and one who cannot tolerate the higher dose. The Jet-Alert brand also offers significant savings, which is why almost three out of four caffeine tablets taken is Jet-Alert.

The Scripto Hybrid Lighter Designer series offers 25 different wrap designs to choose from with the option to create your own custom wraps. It’s the perfect crossover of a multi-purpose lighter and pocket lighter and features a refillable tank, extended nozzle for safer lighting, adult-friendly push-button ignition and adjustable flame. The Scripto Hybrid Lighter Designer series is available in a 50-count display-a-tray and one-pack open stock, with a suggested retail price of $1.20 per lighter in a display-a-tray and $1.25 per one-pack.

Jet-Alert

Calico Brands Inc.

(877) 822-2214 bell@healthsourcemarketing.com

www.jet-alert.com

marketing@calicobrands.com

www.calicobrands.com

Hot Case Empanadas El Monterey Empanadas have a light and flaky crust filled with real ingredients like seasoned beef, chicken, eggs and cheese. Simply bake or fry, place in serving sleeves and merchandise in a hot case for up to four hours. Consumers love the taste and portability. These handmade empanadas are a great way to increase hot case sales and meet strong consumer demand for on-trend foods.

Ruiz Foods

www.ruizfoodservice.com/foodservice 80

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PRODUCTShowcase

Buffalo Chicken LTO Chester’s Chicken is introducing a new Buffalo Chicken Sandwich and Buffalo Chicken Bites, available for a limited time only. The promotion starts Memorial Day weekend and runs through September in participating locations. The Buffalo Chicken Sandwich features a fried breast fillet smothered in Chester’s tangy buffalo sauce, served on a brioche bun and topped with white American cheese and dill pickle chips. The Buffalo Chicken Bites are fried and sauced to make the perfect poppable summer snack.

Chester’s Chicken

www.chesterschicken.com

Higher Alcohol Seltzer Option Higher ABV White Claw Hard Seltzer Surge hits the market in two flavors: Blood Orange and Cranberry. At 8% alcohol in a 16-ounce can, White Claw Hard Seltzer Surge is perfect for consumers looking for a higher-alcohol option and the fruit flavor profiles they expect from White Claw. White Claw Hard Seltzer Surge is available nationwide.

White Claw Hard Seltzer

Iced Tea Brewers and Dispensers Curtis’ iced tea brewers and dispensers are available in a wide variety of G4 and G3 digital technology models for ultimate programming flexibility. With a sleek design and stainless-steel construction, each dispenser is NSF Certified and built to withstand rigorous foodservice environments. TCN Narrow Tea Dispensers offer a small footprint, and the TCO tea dispenser is available in a variety of sizes. Sloping bottoms allow for easy dispensing, and welded-on stainless-steel handles/ hand grips allow for conveniently moving the dispenser even when it’s completely full. Additionally, Curtis offers touchless dispensing adapters.

Wilbur Curtis Co.

www.wilburcurtis.com/microsite/icedtea

www.whiteclaw.com

Crunchy Peanut Bar The Hershey Co. is rolling out another permanent addition to the Reese’s product family — the new Reese’s Peanut Crunchy Bar. It’s the same peanut butter and chocolate combo consumers love, but now with peanuts and peanut butter creme to give the bar that crunchy and creamy taste. The Reese’s Peanut Crunchy Bar will be available in retail stores nationwide in a 3.2-ounce king size, with a suggested retail price of $1.89.

The Hershey Co.

www.thehersheycompany.com cstoredecisions.com

June 2021 • CSTORE DECISIONS

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PRODUCTShowcase

Almond Brownie Innovation Snickers Almond Brownie, the newest addition to the Snickers brownie portfolio, will launch in August 2021 in single (1.26 ounces), share (2.52 ounces) and sharing standup pouch (6.93 ounces) sizes, featuring a chewy brownie filling, mixed with chopped almonds and topped with a layer of caramel, all coated in dark chocolate.

Mars Inc.

www.mars.com

Artisan Bakery Portfolio The new Cottage Bakery portfolio from Rich Products enables convenience store operators to elevate their menus with high-quality, handcrafted artisan breads and rolls. Rich’s Cottage Bakery breads are fully baked on a stone hearth, then flash-frozen, making it easy for c-stores to simply bake and serve. The broad portfolio includes baked artisan sandwich carriers, thin-crust bread, dinner rolls, baguettes, batards, flat loaves, sourdough boules, cornbread, Bake at Home Bread and expanded specialty offerings.

Herbal Energy Shot Woke Up! Energy Shot, the all-natural, plant-based caffeine shot, boasts zero sugar and a proprietary formula packed with adaptogens, herbs, healthy mushrooms, vitamins and amino acids. The shot’s caffeine is extracted from two Amazonian plants, yerba mate and guarana, which not only contain caffeine (one two-ounce shot equal to one and a half cups of coffee), but also contain powerful constituents to improve the body’s response to stress, give a long-lasting focused boost of energy and eliminate the notorious energy crash.

Woke Up! Energy Shot

www.wokeupenergyshot.com

Rich’s Foodservice

www.richsconvenience.com

Four-Step Narrow Pyramid Display SPC Retail’s Benchmaster Four-Step Narrow Display is perfect for merchandising tight walkways, spaces and forecourt pump islands. This configuration combines the vertical merchandising strategy of SPC Retail’s multi-level displays with the unique look of its pyramid displays. This display stands at 36 inches tall and is available in three lengths. Tackle the challenge of merchandising the smallest of spaces and turn any storefront into a well-organized and highly visible shopping experience that pulls shoppers into the store.

SPC Retail

(800) 953-6899 • www.spc-retail.com

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PRODUCTShowcase

Hard Seltzer Punch Variety Pack Truly Hard Seltzer announced the launch of Truly Punch Hard Seltzer, a bold new variety pack that blends the familiarity of traditional punch with explosive fruit flavors. Available nationwide, Truly Punch Hard Seltzer features four new flavors: Tropical, Fruit, Citrus and Berry. The new line can be found in bright, colorful red packaging that’s representative of the bold, full flavors inside the cans. Each style has one gram of sugar, 100 calories and 5% ABV, just like the rest of the Truly lineup.

Truly Hard Seltzer

www.trulyhardseltzer.com

Sour Wedge Candies The Promotion In Motion Companies Inc. announced new dynamic packaging graphics and an expansion into new flavors and mixtures of its Sour Jacks Sour Wedge Candies. The newest variety to join the lineup is Original Sour Jacks Sour Wedges, featuring a five-flavor mix. The new combination joins the revamped Sour Jacks Watermelon, Sour Jacks Wildberry and Sour Jacks Green Apple Sour Wedge varieties. Sour Jacks Sour Wedges are offered in fourand five-ounce peg bags with suggested retail prices ranging from $1 to $1.79.

The Promotion In Motion Companies Inc. www.promotioninmotion.com

Spicy Almond Line Blue Diamond Growers is turning up the heat with its new line of Blue Diamond XTREMES almonds. Available in three super-hot flavors: Cayenne Pepper (hot), Ghost Pepper (hotter) and Carolina Reaper (hottest), these new almonds are made with real peppers and have a spicy flavor rush that takes snacking to the next level. Blue Diamond XTREMES have six grams of plant protein and are an excellent source of antioxidant Vitamin E and a good source of magnesium.

Full Spectrum, Organic CBD Gummies Cornbread Hemp announced the launch of its Organic Berry CBD Gummies. Made with 100% plantbased, vegan-friendly ingredients, this is the first CBD gummy product to be full spectrum and USDA certified organic. Instead of using gelatin or other animal products, Cornbread Hemp uses apple pectin. The new CBD Gummies are made with the highest levels of minor cannabinoids and up to 0.3% THC, with certificates of analysis available on every batch. Plus, every Cornbread Hemp product is protected by a tamperproof seal of authenticity and seedto-sale tracking technology.

Cornbread Hemp

www.cornbreadhemp.com

Blue Diamond

www.bluediamond.com

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Classifieds/Ad Index Altria Group Distribution Company 5-Hour Energy

19

727.449.2296 / www.gulfcoast.com

ADD Systems

37

800.367.8325 / info@HMFfoodservice.com www.HMFfoodservice.com

2

www.5hourEnergyRetailer.com

800.922.0972 / www.addsys.com

Bidi Vapor, LLC bidivapor.com

46-47

Gulfcoast

3

Home Market Foods, Inc. Hoshizaki Hunt Brothers Pizza

Calico Brands, LLC

58

877.515.0939 / www.invenco.com/s/csd

Invenco

71

Kooler Ice Vending Machines

17

888.824.3256 / www.cbprices.com / www.hempbombs.com / www.naturesscript.com

Krispy Krunchy Chicken

21

Chester's Chicken

87

Legal Lean

32

Cheyenne International, LLC

39

Liggett Vector Brands

31

www.chickenchampions.com 800.544.4837 / www.calicobrands.com

CB Distributors

6-7

800.646.9403 / www.chesterschicken.com 886.254.6975 / contactus@cheyenneintl.com www.cheyenneintl.com

Click It Inc.

73

www.clickitinc.com

E-Alternative Solutions

EalternativeSolutions.com/Leap

26-27

GSK C-Store

Scott.F.Breisinger@gsk.com

15

800.858.3025 / www.kookerice.com/fixmyice 800.290.6097 / www.krispykrunchy.com 321.236.2619 / ww.legalleanstore.com 877.415.4100

MasonWays Indestructible Plastics, LLC

800.837.2881 / www.masonways.com

McLane Company, Inc. cvpproducts.com/info

Modern Store Equipment

cstoredecisions.com

Proctor & Gamble

45

Republic Tobacco Safe Shop Assured

59 78-79

www.safeshopassured.com

Swedish Match

800.367.3677 www.zyn.com www.gamecigars.com www.whiteowlcigar.com www.swedishmatch.com

Swisher International

800.874.9720 / www.swisher.com

11 23, 43 33 55 Cover, 88

Twang

61

Vaporlax

51

800.950.8095 / info@twang.com

85

800.775.8970 / mipodwholesale.com

Vitamin Energy

9

12-13

800.420.3106 / Sales@VitaminEnergyLLC.com

XCalibur International

25

877.532.8433 / sales@modernstoreequipment.com modernstoreonline.com/cstore

www.masonways.com

35

www.PGConvenience.com

65

69

Premier Manufacturing, Inc. www.gopremier.com

5

Brakebush

76

866.481.4604 / www.nynab.com

21

800.453.3675 / www.huntbrotherspizza.com/csd

North American Bancard

41

918.824.0300 / www.xcaliburinternational.com

800-837-2881 June 2021 • CSTORE DECISIONS

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IndustryPerspective

Third-Party Delivery Apps

— Friend or Foe?

With delivery on demand likely here to stay, c-stores must weigh the best way to enter the space — be it third-party partners, proprietary solutions or a hybrid of both. Cameron Parker • Euromonitor International

Though not typically associated with e-commerce innovation to the same degree as other channels, convenience stores have proven more than willing to adapt during the COVID-19 pandemic by prioritizing omnichannel strategies. On the one hand, convenience stores were quick to deploy curbside pickup services that worked well for grocers and mass merchandisers. Giving customers the option to order and pay remotely before picking up became essential for cstore retailers to ensure they were not being left further behind. But the real story continues to play out in delivery. Some c-stores have been able to go it alone — like upscale brand Foxtrot, headquartered in Chicago. Its 60-minute delivery promise has seen success with the urban millennial cohort. However, many c-stores do not have the resources to offer their own proprietary delivery services, instead opting to partner with third-party delivery aggregators that operate their own mobile apps. This gives retailers exposure to an enormous pool of potential customers without having to invest in building delivery infrastructure themselves. But despite efforts to expand their online reach, convenience 86

CSTORE DECISIONS •

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stores are increasingly facing competition from the very partners they have relied upon to do so. On the back of an explosive 2020, driven by soaring demand for restaurant food delivery, DoorDash introduced its online convenience store platform DashMart. Akin to the delivery-only ghost kitchens that have proliferated throughout the restaurant industry, DashMart’s virtual stores are able to operate at a much lower cost than their brickand-mortar counterparts. Elsewhere, Uber recently announced it was partnering with delivery platform GoPuff to offer essential items, having already acquired on-demand alcohol delivery service Drizly earlier this year. The company’s Uber Eats platform is now host to a wide array of products and services that go far beyond restaurant food, providing further competition to c-stores hosted on its app. The success of Uber Eats was underscored by its performance last year when it exceeded the company’s ridehailing revenue for the first time. PARTNERSHIP CONSIDERATIONS

The growing number of options available to consumers on thirdparty apps is bound to eat away share from the more established c-store players. But with mobility

still somewhat suppressed due to the lingering effects of the pandemic, it will be some time before c-stores can fully capitalize on one of the most important segments of their traditional customer base — commuters. For now, c-stores have little choice but to continue partnering with delivery apps. Over the shortterm, a multi-pronged approach to omnichannel — combining in-house services with external partnerships — is perhaps the best way to expand their customer base and drive sales. The long-term benefits of partnership, however, are less clear. Once people return to work and pre-pandemic travel patterns fully recover, some convenience stores may decide that offering delivery is a luxury they no longer need to accommodate. But for consumers who appreciate the option of having an emergency bottle of wine or a late-night snack delivered in short order, the genie may well be out of the bottle. Cameron Parker is a research analyst at Euromonitor International. Parker analyzes developments in the global services and payments landscape, providing insight on consumer trends, marketplace dynamics and competitive environments across industries. Visit Euromonitor.com.

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