Convenience Store Decisions June 2019

Volume 30 • Number 6 • JUNE 2019 Business Solutions for Retail Decision Makers

®

Adapting to

Tobacco Category Evolution As regulations erect roadblocks to tobacco sales, c-store retailers expand into alternate segments in hope of finding new ways to grow sales.

INSIDE:

Vape in FDA Crosshairs Considering CBD

Cigars Await Future Regulation

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June 2019

Vol. 30 • No.6

CONTENTS 24 COVER STORY

Adapting to Tobacco Category Evolution

As regulations erect roadblocks to tobacco sales, c-store retailers expand into alternate segments in hope of finding new ways to grow.

EDITOR'S MEMO

TECHNOLOGY

8 Editor’s Memo: NAG Continues Support of

60 Data Segmentation Boosts Loyalty Success

Higher Education

FRONT END 10 Front End Profile: The Grocery Wows with Fresh,

Healthy Fare 14 CSD’s Quick Bites 16 YEO Conference Convenes in Springfield 18 Tobacco Column: Responding to Local Tobacco Ordinances 20 Cannabis Column: Thinking Ahead on Marijuana in C-Stores

BACK END 64 Product Showcase 68 Quick Stop 69 Ad Index

70 Industry Perspective: How CBD is Changing

Tobacco Sets

42

CATEGORY MANAGEMENT 32 Vape in FDA Crosshairs

36 RYO Flies Under the Radar

38 Is Menthol FDA’s Next Target?

42 Cigars Await Future Regulation

32

46 Smokeless Sees Opportunity 50 Lighters Lead the Pack

52

52 Considering CBD

FOODSERVICE 54 C-Stores Heat Up Chicken Programs 58 Elevating Pizza and Roller Grill

4 Convenience Store Decisions June 2019

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46 cstoredecisions.com

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THE CSD GROUP

Convenience Store Decisions • Leading Through Innovation • www.cstoredecisions.com Convenience Store Decisions

CStoreDecisions ecisions .com EDITORIAL

CREATIVE SERVICES

DIGITAL MARKETING

VICE PRESIDENT, EDITOR-IN-CHIEF John Lofstock jlofstock@csdecisions.com

VICE PRESIDENT, CREATIVE SERVICES Mark Rook mrook@wtwhmedia.com

DIGITAL MARKETING DIRECTOR Virginia Goulding vgoulding@wtwhmedia.com

EXECUTIVE EDITOR Erin Del Conte edelconte@csdecisions.com

CREATIVE DIRECTOR Erin Canetta ecanetta@csdecisions.com

DIGITAL MARKETING MANAGER Amanda Fourlaris afourlaris@wtwhmedia.com

SENIOR EDITOR Thomas Mulloy tmulloy@csdecisions.com

ART DIRECTOR Matthew Claney mclaney@wtwhmedia.com

WEBINAR COORDINATOR Halle Kirsh hkirsh@wtwhmedia.com

ASSOCIATE EDITOR Isabelle Gustafson igustafson@csdecisions.com ASSOCIATE EDITOR Howard Riell hriell@csdecisions.com ASSOCIATE EDITOR Marilyn Odesser-Torpey mot@csdecisions.com CONTRIBUTING EDITORS Anne Baye Ericksen Pat Pape Brad Perkins COLUMNISTS Don Burke Jim Calvin Steve Sandman

ADVERTISING VICE PRESIDENT/GROUP PUBLISHER Tom McIntyre tmcintyre@csdecisions.com

DIRECTOR, AUDIENCE DEVELOPMENT Bruce Sprague bsprague@wtwhmedia.com

VIDEO SERVICES VIDEOGRAPHER Bradley Voyten bvoyten@wtwhmedia.com VIDEOGRAPHER Derek Little dlittle@wtwhmedia.com VIDEOGRAPHER Graham Smith gsmith@wtwhmedia.com

FINANCE CONTROLLER Brian Korsberg bkorsberg@wtwhmedia.com

(216) 533-9186

ACCOUNTS RECEIVABLE SPECIALIST Jamila Milton jmilton@wtwhmedia.com

PUBLISHER John Petersen jpetersen@csdecisions.com

DIGITAL MEDIA/WEB/ DEVELOPMENT

(216) 346-8790

VICE PRESIDENT, SALES Tony Bolla tbolla@csdecisions.com

(773) 859-1107

REGIONAL SALES MANAGER Ashley Burk aburk@wtwhmedia.com

(737) 615-8452

WEB DEVELOPMENT MANAGER B. David Miyares dmiyares@wtwhmedia.com

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

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

LEADLIFT ONBOARDING SPECIALIST Mike Ulanski mulanski@wtwhmedia.com

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

EVENTS

Brad Call, President Colour Du Jour • Salt Lake City

EVENTS MANAGER Jen Kolasky jkolasky@wtwhmedia.com

Bill Kent, President and CEO The Kent Cos. Inc. • Midland, Texas

EVENT EXHIBITOR & SPEAKER MANAGER Michelle Flando mflando@wtwhmedia.com EVENTS MARKETING SPECIALIST Christina Lograsso clograsso@wtwhmedia.com

PRODUCTION/CUSTOMER SERVICE CUSTOMER SERVICE MANAGER Stephanie Hulett shulett@wtwhmedia.com CUSTOMER SERVICE REPRESENTATIVE Barbra Martin bmartin@csdecisions.com DIGITAL PRODUCTION MANAGER Reggie Hall rhall@wtwhmedia.com DIGITAL PRODUCTION SPECIALIST Brian Furda bfurda@wtwhmedia.com

SENIOR DIGITAL MEDIA MANAGER Patrick Curran pcurran@wtwhmedia.com

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

Billy Milam, President RaceTrac Petroleum Inc. • Atlanta Patrick J. Lewis, Managing Partner Oasis Stop ‘N Go • Twin Falls, Idaho Scott Zaremba, President and CEO Zarco USA • Lawrence, Kan.

NATIONAL ADVISORY GROUP (NAG) BOARD Robert O’Connor, Board Chairman O’Connor Petroleum Co. • Hales Corners, Wis. Mary Banmiller, Director of Retail Operations Warrenton Oil Inc. • Truesdale, Mo. Greg Ehrlich, Chief Operating Officer Beck Suppliers Inc. • Fremont, Ohio Doug Galli, Vice President, General Manager Reid Stores Inc./Crosby’s • Brockport, N.Y. Joe Hamza, Chief Operating Officer Nouria Energy Corp • Worcester, Mass.

Brent Mouton, President and CEO Hit-N-Run Food Stores • Lafayette, La. Peter Tamburro, General Manager Clifford Fuel Co. • Utica, N.Y.

DIGITAL MEDIA SPECIALIST Nicole Lender nlender@csdecisions.com

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

YOUNG EXECUTIVES ORGANIZATION (YEO) BOARD Bart Stransky, Board Chairman RaceTrac Petroleum Inc. • Atlanta

WTWH MEDIA, LLC 1111 Superior Ave., 26th Floor, Cleveland, OH 44114 Ph: (888) 543-2447 EDITORIAL AND NAG 1420 Queen Anne Rd., Suite 4, Teaneck, NJ 07666 Ph: (201) 321-5642

Garet Bishop, Chief Financial Officer BFS Cos. • Morgantown, W.Va. 2011 - 2018

SUBSCRIPTION INQUIRIES To enter, change or cancel a subscription, please e-mail requests to: bmartin@csdecisions.com or Mail: Convenience Store Decisions, 1111 Superior Ave., 26th Floor, Cleveland, OH 44114 Copyright 2019, WTWH Media, LLC

Convenience Store 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 Convenience Store Decisions at no charge. For others, the cost is $80 a year in the U.S. and Possessions, $95 in Canada, and $150 in all other countries. Single copies are available at $9 each in the U.S. and Possessions, $10 each in Canada and $13 in all other countries. Periodicals postage paid at Cleveland, OH, and additional mailing offices. POSTMASTER: Send address changes to Convenience Store Decisions, 1111 Superior Avenue, 26th Floor, Cleveland, OH 44114. GST #R126431964, Canadian Publication Sales Agreement No: #40026880.

CONVENIENCE STORE DECISIONS does not endorse any products, programs or services of advertisers or editorial contributors. Copyright© 2019 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.

6 Convenience Store Decisions June 2019

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Caroline Filchak, Director, Wholesale Ops Clipper Petroleum • Flowery Branch, Ga. Kalen Frese, Food Service Director Warrenton Oil Inc. • Warrenton, Mo. Alex Garoutte, Director of Marketing The Kent Cos. Inc. • Midland, Texas Sharif Jamal, Corporate Training Manager Chestnut Petroleum Inc. • New Paltz, N.Y. Lindsay Lyden, Vice President, Development Truenorth Energy • Brecksville, Ohio Jeremie Myhren, Chief Information Officer Road Ranger • Rockford, Ill.

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EDITOR’S

Memo

NAG Continues

Support of Higher Education

A

S THE FOUNDER OF NICE N Easy Grocery Shoppes, John MacDougall was a longtime supporter of the National Advisory Group (NAG).

In his personal life, he was also a strong supporter of higher education. Though MacDougall passed away in 2014, we continue to honor his legacy and his longtime support of NAG. For the fifth consecutive year, the association will remember John’s influence on NAG and the entire convenience store industry by offering the John MacDougall/ NAG Memorial Scholarship exclusively to NAG members.

As the economy continues to flourish, we all understand the importance of a well-educated workforce, and the c-store landscape is certainly no exception. The NAG scholarship fund was developed to help qualified individuals offset some of these costs. Part of NAG’s core mission is to help to cultivate and groom the convenience store leaders of tomorrow.

In keeping with that theme, NAG created this scholarship fund for employees and children of NAG member companies. In 2018, NAG awarded six scholarships to qualified students totaling $8,000. I’m sure John would be proud of our efforts to support higher education.

The Program The NAG Scholarship Fund is managed by the NAG Board of Directors, Convenience Store Decisions and Scholarship America, and sponsored by the retailer and supplier members of NAG. This program was started in the late 1990s and has distributed more than 100 scholarships totaling more than $112,000 to deserving students. The fund is financed through annual dues collections by NAG members and drives from golf outings and conference sponsorship allocations.

The Awards This year, we are recognizing five recipients and have a healthy scholarship fund to ensure the collegeage children of NAG member companies will receive financial assistance to pursue their goals of becoming the leaders of tomorrow.

The program utilizes standard Scholarship America recipient selection procedures, including past academic performance and future potential, leadership and participation in school and community activities, work

8 Convenience Store Decisions June 2019

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

experience and an outside appraisal.

This year, five awards of $1,000 will be granted. Awards are not renewable, though students may reapply to the program each year they meet eligibility requirements.

Applications must be postmarked by June 17, 2019.

Eligibility Applicants who work in the c-store industry must be employees or children of employees who have a minimum of one-year employment with a NAG member company. Applicants must plan to enroll in a full- or part-time undergraduate course of study at an accredited two- or four-year college, university or vocationaltechnical school. Applicants who are current students or who have attended school within the past three years must have maintained a minimum 2.5 GPA on a 4.0 scale.

I hope you’re able to take advantage of this program by becoming a member of NAG. For more information on both the scholarship and the association, please visit www.nagconvenience.com. And please be sure to mark your calendar for the 2019 NAG Conference in Minneapolis, Sept. 8-11.

NAG was founded in 1982 by former retailers who were concerned that other associations were too focused on larger chains. After 37 years, our mission remains the same: To help convenience store retailers interact with one another to discuss new concepts, share information and come away with innovative ideas to grow sales and profits. NAG’s role in the competitive c-store industry remains unquestioned. There is a void in the channel for this type of passionate organization, composed of executive-level retailers from small, mid-sized and family-owned chains. NAG remains an organization that is fully committed to its members.

Should you have any questions, please feel free to contact me at (201) 321-5642 or via email at jlofstock@csdecisions.com. For information about Scholarship America or eligibility requirements, contact program manager Rita Gibbs at ritagibbs@scholarshipamerica.org.

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FRONTEND

Profile

The Grocery Wows with Fresh, Healthy Fare From plant-based and local ingredients to adaptogens, The Grocery meets neighborhood demand for the latest health trends.

Isabelle Gustafson, Associate Editor

S

INCE THE OPENING OF its first location in 2015, The Grocery has been providing fresh and local products to Cleveland customers on the go.

Owner Rachel Kingsbury is a Cleveland-area native with a background in fast-casual restaurants. She said she didn’t have any business experience when she decided to open a convenience store in a growing urban neighborhood, but she’s had healthy eating in mind from the start.

“There was a need to provide amenities to the people that lived and walked and worked in the area,” said Kingsbury. “If eating healthy and having access (to healthy food) is easy and convenient, people will do it.”

ROOM TO GROW Kingsbury opened a second location in October 2018, after a developer approached her with an opportunity: to open a store on the ground level of a brandnew, mixed-use development with 194 apartment units.

“I felt that their vision for changing the neighborhood to be a safer, more communityoriented corner was something that was synonymous with what I’d like to do with my business,” she said.

Not long ago, the area was largely industrial, but it’s rapidly changing. A few months after the second store opened, another development, with 158 apartment units, broke ground directly across the street.

10 Convenience Store Decisions June 2019

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Profile

The Grocery offers healthy grab-and-go food and drinks. The cold-pressed juice is made in-house and features fresh fruits and vegetables.

fresh meal-planning services as well, though she said it’s “in a beta program now.”

“We’ll put together a meal for people to come pick up for their family, or a couple meals for them to have throughout the week,” she said.

She likes to focus on freshness of ingredients and enjoys catering because she can tailor the food to exactly what the customer wants.

“I’ve done a lot of all-vegan events.”

Kingsbury said these events, and the stores in general, gained support initially through word of mouth, but now social media is the driving force.

Apart from hundreds of potential new customers, the second location of The Grocery provided something the first location lacked: space. The 1,200-square-foot store is nearly triple the size of the original location.

The second location has seating and, coupled with back-of-house space, allows for more foodservice PLANT-POWERED In addition to traditional grab-andvariety. Kingsbury said the new space also enables the store to “buy more go items like sandwiches, Kingsbury products from local farmers and then said her customers are seeking newer, plant-based options, including smoothturn them into ready-to-eat food.”

She does stock some produce and ie bowls and cold-pressed juice.

The stores make juice in-house and frozen foods, but she said grab-andusually stock four or more varieties. go items are increasingly in demand.

“People are working longer hours The green juice, a popular choice, and have a baby and a single- or two- is made with fresh kale, cucumber, person household, so they don’t want celery, apple, orange and lemon.

There’s also a fully stocked salad to go through the hassle of dinner bar at the second location, as well seven nights a week,” she said. as vegan-friendly, frozen foods like EVENTS & SERVICES Beyond Meat’s plant-based burgers.

“Even if people aren’t vegan or vegThe Grocery also does regular catering, from office luncheons to etarian, they tend to choose a vegetabridal breakfasts or bagged lunches ble-forward menu item,” she said.

With produce, Kingsbury said the for sports teams — and offers some 12 Convenience Store Decisions June 2019

10-13_PROFILE_Grocery.indd 12

ability to sell locally sourced products depends largely on the season. When local isn’t possible, she goes for organic. With animal products, she’s especially stringent.

“I take a hard stance on sourcing meat and dairy products locally from places where I know what the animals are eating, and I know their living conditions, because that’s really important to me,” she said. “After that, I look to see that local makers don’t have highly processed foods. ...

Something that I would be willing to put into my body.”

As for alcohol, Kingsbury said many of the options are local, but with wine, she focuses on the ingredients and the type of vendor.

“We do have some organic wines, natural wines, and they come from everywhere,” she said. “We just try to keep it a cleaner-profile wine, usually from a smaller vendor.”

She said she chooses not to carry tobacco. She considered CBD products but decided to wait until the laws surrounding CBD were clearer.

The 2018 U.S. Farm Bill federally legalized hemp-derived CBD, but the Food and Drug Administration (FDA) has yet to create rules around CBD in food products.

The process can take two to three years for typical products. Because of CBD’s association with marijuana, and cstoredecisions.com

5/24/19 2:01 PM

On Tuesdays, The Grocery’s salad bar, stocked with local and organic ingredients, is transformed into a taco bar.

because it was already approved by the FDA as a drug to treat epilepsy, it could take much longer.

“I didn’t want to take the jump until I was sure about what I was getting myself into,” said Kingsbury. “So I don’t have any CBD products, but I do use hemp protein, which is just a good, complex protein powder that we add to smoothies.”

HERBAL REMEDY Apart from healthy and plant-based prod-

10-13_PROFILE_Grocery.indd 13

The herbs and roots in adaptogens ucts, the latest trend gaining traction, have been used for centuries, but she said, is adaptogens.

Adaptogens are nontoxic herbs there’s not much research on exactly and roots said to help the body how they affect the human body.

There is plenty of research on the resist stress. Some can be eaten as part of a meal. Others are con- effects of food, though. And Kingssumed as supplements or brewed bury said customers are more informed about their food choices now into teas.

“Adaptogens work with your body than ever before.

“People are treating food as to do things that, a lot of times, people supplement medicine for,” said medicine, and they’re asking more informed questions,” she said.

Kingsbury.

The store offers a local brand, “They’re asking, ‘How can I cook with Supervos, which has products it?’ instead of, ‘I’m just buying this intended to alleviate sleeplessness, because it’s healthy, and then it’s going to go sit in my fridge.’” CSD stress and fatigue, to name a few.

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QuickBites CAST YOUR ‘NET’ TO CAPTURE MILLENNIALS

Dialing Up Dollars 63% of consumers use their mobile phone

while in a store to compare prices, look for offers/ coupons, check inventory and so on.

67% of consumers indicate mobile coupons

and promotions are an important factor in determining at which store they shop.

40% of consumers are likely to shop at a store offering mobile point of sale options.

Source: BRP Consulting, “2019 Special Report – In-Store Mobility.”

Healthy Milk Options Roughly three out of four skim-milk or milk-alternative drinkers are trying to eat healthier.

65%

of whole-milk drinkers say they eat what they want regardless of calories.

More than half of skim-milk and milkalternative drinkers claim nutritional value is the most important factor in foods they purchase.

Among users of milk and dairy alternatives, those who prefer whole milk are the least likely to claim their diet is very healthy.

Source: Packaged Facts, “Milk & Dairy Milk Alternatives.”

14 Convenience Store Decisions June 2019

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92% of millennials

said website/app appearance was important when deciding whether or not to submit their personal info.

74% of millennials

said they’d buy a product or service if the company behind it supports a cause they personally believe in.

Millennials overwhelmingly prefer their phones for making online purchases:

58%

say their phones are their go-to online shopping devices, compared to their laptops, desktops and tablets.

65% of millennials

said they’re more likely to buy a product or service if it’s recommended by a friend on social media (compared to only 40% of baby boomers!)

Millennials are 25%

more likely than older generations to buy a product or service because of an ad on social media, and they’re 25% more likely to engage with online ads in general.

Source: Clever Real Estate, “Marketing to Millennials 2019.”

Consumers Act Naturally Consumers perceive “natural” as a vague product term, but not without meaning. They are seeking an ideal of natural that would mean healthy, whole, real and minimally processed.

43%

54%

believe natural means no artificial flavors/colors/ preservatives.

say they are buying more “natural” than a year ago.

51%

believe natural products are more nutritious than conventional.

24%

trust a label with an “all natural” claim.

Source: The Hartman Group, “Organic & Natural 2018.”

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FRONTEND

YEO News

YEO Conference Convenes in Springfield The industry’s next-generations leaders toured McLane’s Ozark Distribution Center, leading conveneince stores in the market and and participated in educational sessions on key issues impacting chains across the country.

By CSD Staff

T

he Young Executives Organization (YEO)’s sixth annual conference took place May 1-2, in Springfield, Mo. Hosted by McLane, the event for young executives and next generation leaders included educational sessions, ample networking time, convenience store tours and an inside look at the McLane Ozark Distribution Center that integrates cutting-edge robotics.

John Lofstock, executive director of the National Advisory Group (NAG) welcomed the more than 55 founder of The Marketing Artificial mining to improve store performance attendees to the conference and Intelligence Institute, on “Artificial and enable smart growth. “In today’s explained the history of YEO, which is Intelligence and the Future of Retail.” retail climate, being a smart consumer “Eighty percent of what we do ev- of data is what’s going to allow you to part of NAG. “We were looking for a way to bring ery day is going to be intelligently au- continue to maintain relevance and — young executives together. This is tomated to some degree in the next if you desire — to grow,” Myhern said.

“It starts with adopting a data-driven our sixth annual YEO conference. We three to five years,” he said.

Lance Smith, director of McLane mindset and integrating it with your held the first five conferences at convenience store chains. This is the first Inc., explained the ins and outs organization’s culture.”

The Wednesday educational time we’ve gone off-site, and I think of the 370,000-square-foot Ozark the McLane Ozark Distribution Center Distribution Center, which opened sessions concluded with a leadership by Linda McKenna, in Republic, Mo., in 2012. Afterward, workshop is the ideal place to do that.” principal of Employee Performance YEO Board Chairman Bart Stran- attendees toured the facility.

In the afternoon, Dan Kara, vice Strategies Inc. (EPS). sky, vice president of merchandising for On Thursday morning, Nancy CaldAtlanta-based RaceTrac, also welcomed president of robotics and intelligent attendees. “We are proud to have so systems, WTWH Media, spoke about arola, president of The Food Trainmany great chains here to go along with “How Robotics is Changing Retail and ing Group, spoke about foodservice Distribution.” Kara talked about the safety for c-stores, noting that one an exciting agenda,” he said.

For the third straight year, the day tailwinds pushing the digitization of in six Americans becomes sick from before the conference, YEO members robotics and outlined how robotics foodborne illness every year. McKenna had the option to participate in a team- are being used and invested in today. concluded the sessions with a second Jeremie Myhren, chief information leadership workshop. building event with Habitat for Humanity.

YEO attendees then toured a officer for Road Ranger, spoke EDUCATIONAL SESSIONS about “Mining Data in the C-Store handful of the top convenience store The YEO educational sessions Industry.” Data mining is the process chains in the market, including Kum kicked off Wednesday morning with of discovering patterns within large & Go, Signal Food Stores, Casey’s, a presentation from Paul Roetzer, data sets. C-stores can use data Macadoodles and Farm2Counter.

16 Convenience Store Decisions June 2019

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FRONTEND

Tobacco Column

Responding to Local Tobacco Ordinances Onerous local ordinances can change a c-store’s tobacco business in an instant. The National Response Network now provides strategies to help retailers better respond.

Jim Calvin, NYACS

I

n the Mohawk Valley community of Dolgeville, N.Y., students involved in the “Reality Check” anti-tobacco group at the local high school went before the village board to highlight the alarming rates of youth vaping.

“The young people came and made a presentation about the products, and we were very interested in their undertaking,” the mayor told the local newspaper, implying the board was so swept away that they spontaneously hatched legislation aimed at curbing youth access to tobacco and e-cigarettes.

But the law was neither spontaneous nor homemade. Eight pages long, it required Dolgeville’s three retail stores to get a tobacco license every year from the village for a $200 fee, even though they already had one from the state — a $300 fee. It capped the number of such licenses at three. It required license revocation if the store failed a U.S. Food and Drug Administration (FDA) sting that the FDA felt was punishable only by a warning letter. It banned tobacco coupons and buy-one-get-ones. It required list price shelf tags. Big-city tobacco legislation in tiny Dolgeville, population 2,098.

Welcome to today’s world of local tobacco and vaping product regula-

18 Convenience Store Decisions June 2019

18_FE_Jim Calvin Column.indd 18

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

tion. Redundant layers of onerous re- passed, all it takes is a retail communitailing restrictions, meticulously pre- ty that is either unaware or apathetic. pared by far-away, taxpayer-funded lawyers and academics behind the NATIONAL RESPONSE NETWORK The good news is that your scenes, disguised as a homegrown response to community concern, pro- state or regional convenience posed and adopted in a month’s time store association now has help in without any consideration of how re- monitoring local legislative activity, mobilizing retailers and providing tailers will be affected.

In Albany County, N.Y., where background and talking points.

To develop a more educated and one party dominates the county legislature, a bill was introduced to ban engaged retail community, the Naflavored e-cigarettes. Within a few tional Association of Tobacco Outlets months, it had morphed into a ban on (NATO) has created a coalition called all flavored tobacco products, includ- the National Response Network ing menthol cigarettes and flavored (NRN). NYACS and other trade orgacigars. It hasn’t been voted on yet. nizations have joined NRN to share The New York Association of Conve- information and outreach strategies nience Stores (NYACS) is among the to respond to local ordinances.

In conjunction with NRN, there’s a retail groups fighting it.

Also considering its own menthol new National Local Advocacy Alliance cigarette and flavored e-cigarette website — nationallocaladvocacyalban is New York City, another one- liance.org — to help retailers learn party-rule jurisdiction. At the public about and respond to local threats. hearing before the health commit- You can sign up there to receive alerts tee, it was nearly four hours before about pending legislation in the comthey called a witness who opposed munities where you operate stores.

It’s high time these village boards the legislation, and by then, only one committee member was still there and county legislatures got a dose to hear it. NYACS is also engaged in of “reality” from another vantage point — that of the licensed, tax-colthis battle.

To light the fuse of excessive lo- lecting, age-verifying retailer who cal tobacco regulation in your county doesn’t deserve to be marginalized or municipality, all it takes is a few for selling legal tobacco products to pushy public health activists. To get it adult customers.

cstoredecisions.com

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6/5/19 12:46 PM

FRONTEND

Cannabis Column

Thinking Ahead on Marijuana in C-Stores Convenience stores could have distinct advantages in marketing cannabis, should marijuana become legal.

Don Burke, Management Science Associates Inc.

T

hinking ahead often pays off — and for the convenience retailer, it has the potential to pay off big when considering the sale of marijuana. The convenience channel has several distinct advantages over the other classes of trade that should provide for major business gains if marijuana is legalized.

Of course, much has to happen for this to become a reality. Currently, 10 states plus the District of Columbia have legalized marijuana for recreational purposes, and in 2019, it is encouraging that additional state governors and legislators are considering recreational legalization.

It is important to note that, as states legalize marijuana for recreational purposes, laws will need to allow for its sale at traditional retail outlets rather than dispensaries.

Realistically, for the c-store retailer to capitalize on the selling of marijuana, it will be best for positive action to also occur at the federal level. This will allow marijuana 20 Convenience Store Decisions June 2019

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purchases to occur using a credit card, as with any other transaction. Support to bring federal requirements in line with state regulations is stronger than ever in Washington, and for the c-store retailer, there is good reason to hope this occurs.

Consumer opinion of marijuana is more positive than ever. Management Science Associates (MSA) recently reviewed research showing that two-thirds of adults approve of medical and/or recreational use. Eighty percent of consumers that have tried marijuana said they’re likely to use it again within the next year, and 72% of this group approve of both recreational and medical use. With this rising tide of strong consumer sentiment, there will be increased pressure to bring federal regulations in line with those of the states.

MSA’s analysis of consumer interest levels, conducted by reviewing Google search trends, revealed that this strong consumer interest in marijuana is not going to abate.

For perspective, MSA has been monitoring Google search trends for many years as we tracked and projected the growth of the vapor category. With the launch of Juul, search trends in the vapor category have increased significantly, most notably where ‘Juul’ was included in the search terms. However, since late 2017, the growth rate in search for CBD/cannabis has far exceeded that of ‘Juul’/vapor, suggesting that far stronger consumer demand is on the horizon.

C-STORE ADVANTAGE This horizon looks very bright, as convenience retailers have several significant advantages over other trade channels in the potential selling of marijuana. Research conducted on 70,000 adults in over 65 markets in the U.S. explored the demographic profile of the typical cannabis purchaser. The most likely marijuana purchasers are males 18-49 years old, which closely aligns with the typical ccstoredecisions.com

5/24/19 5:24 AM

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FRONTEND

Cannabis Column

store shopper. For female consumers, the marijuana purchaser skews younger, in the 1834 category. Further, the typical marijuana purchaser tends to be younger, single, childless and rents rather than owns a home.

Should marijuana sales become legal, c-store retailers have the most likely cannabis purchaser walking through juana and those of tobacco. We altheir door several times a week.

This study identifed another ready know a close relationship exists interesting characteristic of the between the purchases of these two marijuana purchaser: The typical products, but it also appears there purchaser is more likely to be a can be some cannibalization of tobaccurrent tobacco consumer. This co sales in states where marijuana is is another big advantage for the legal for recreational purposes.

Interestingly, the cigarette convenience retailer — current cigarette or cigar purchasers are category also exhibited slight decline about 50% more likely to purchase in areas where marijuana was both marijuana than the general recreationally legal and where it was population. And the current vaping not legal, suggesting there was not a significant impact on cigarette sales. consumer? About 60% more likely.

While the legalization of Similar results were noted across marijuana in many states and at the the other tobacco product (OTP) federal level is still unknown, the categories — moist, pipe and snus convenience channel has distinct — as no impact was seen on the sales and impressive advantages over of these items where marijuana is other retail channels. Today, many recreationally legal.

Yet, analysis of the cigar category c-store retailers are looking for opportunities to overcome declines found a significant impact on sales in some top convenience categories. where marijuana was recreationally leThe selling of marijuana products gal. In states where marijuana was not has the potential to overcome these legal for recreational purposes, cigars declining categories and grow a were growing by nearly 9%; however, the category declined by more than store’s revenue considerably.

2% where marijuana was recreationTOBACCO SALES ally legal.

CANNIBALIZATION We realized similar results in the vaNevertheless, as you may expect, por category. In states where marijuathe news is not completely positive. na was legal for recreational purposFurther research by MSA shows a re- es, the vapor category grew by 60%, lationship between the sales of mari- compared to a growth of over 100% 22 Convenience Store Decisions June 2019

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in states where marijuana was illegal.

Analyzing both the positives and negatives surrounding the potential sale of marijuana, it is clear the positives far outweigh the possible negatives for the convenience retailer. Just as this category has great potential to build revenue and profitability for the convenience channel, it has a similar ability to build tax revenue for all levels of government.

For these reasons, as well as a strong level of consumer interest, thinking ahead about how to manage this category is a smart exercise for the convenience store retailer. Staying informed on state and federal regulations and industry developments will enable the convenience store retailer to capitalize on the opportunity when cannabis legalization does occur.

Don Burke is a senior vice president at Management Science Associates, a data management and analytics firm. He has 20 years of consumer packaged goods experience working across the cannabis, tobacco, grocery, confectionary and beverage categories. cstoredecisions.com

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Cover Story

Tobacco Report

Adapting to

Tobacco Category

Evolution

T

“Thus far, this year has not been the bloodbath hroughout the first half of 2019, the tobacco category has been inundated with proposed many feared,” said Gregory Conley, president of the legislative restrictions. One Hawaii lawmaker American Vaping Association. “When you consider attempted to graduate the minimum purchase the political situation we faced several months ago, age to 100 (it soon fizzled out in committee). Last we’re exiting a bunch of legislative sessions without month, the Beverly Hills City Council scheduled a too many bad laws. Indiana proposed a tax, which vote to ban the sale of all tobacco products from any died. Taxes in Wyoming were killed, and a 62% tax retailer in the California city other than cigar lounges was close to going on the ballot in Colorado but was and upscale hotels. And of course, the U.S. Food killed by a vote of 25-10 in the state senate.”

Not everything happening to the category is and Drug Administration (FDA) proposed a significant change in its compliance guidance that could viewed negatively. In April, the FDA granted Philip demand convenience stores segregate all flavored Morris International approval to market iQOS in the U.S. Plus, the 2018 U.S. Farm Bill removed restrictions tobacco products.

That’s just a sampling of the more extreme propos- on hemp-derived cannabidiol (CBD) products at als; meanwhile, states and cities continue to weigh the retail level. Although it’s not a tobacco product, CBD has been attracting customers across multiple tax increases and flavor bans.

24 Convenience Store Decisions June 2019

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cstoredecisions.com

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As regulations erect roadblocks to tobacco sales, c-store retailers expand into alternate segments in hope of finding new ways to grow sales.

Anne Baye Ericksen, Contributing Editor

demographic classifications and has created new opportunities for convenience stores.

So, given the multifaceted elements at play, how do c-store owners and operators envision the tobacco category evolving over the second half of 2019?

PREDICTABLE PATTERNS According to the National Association of Convenience Stores (NACS), tobacco transactions accounted for nearly one-third of all merchandise sales in 2018. However, that margin continues to be chipped cstoredecisions.com

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away. Cigarettes claim the largest percentage of total tobacco sales, but nationwide figures have fallen yet again. Per Nielsen research, reported

by Wells Fargo Securities, dollar sales in the c-store channel fell nearly 4% for the four weeks ending April 20.

Even a jump in pricing of more than 5% couldn’t overcome volume drops of 8.7%. Of course, not every store recorded losses this large.

“Cigarettes sales have taken a slight dip, but we’re still managing to stay above the overall decline across the industry, so we’re happy about that,” said Bill Bustin, marketing director for

Dandy Mini Marts Inc. The Sayre, Pa.based company operates 65 Dandy convenience stores in Pennsylvania and New York.

“Cigarette sales have declined slightly, which is expected, but we have seen nice increases from other tobacco products through the first quarter,” said Mike Clifford, category manager for Clifford Fuel Co. Inc. The multigenerational family business owns and operates the Cliff’s Local Market chain as well as full-serve pumpers and car washes.

So far this year, other tobacco products (OTPs) have presented June 2019 Convenience Store Decisions 25

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Tobacco Report

More than a dozen states have decided to raise the minimum purchase age for tobacco products to 21 years old. Similar legislation has been proposed at the federal level.

said Bustin.

“We’re up around 10%.”

H o w e v e r, e cigarettes and vaping mixed results. Smokeless tobacco products — devices, kits and refills — totaled more than $6.1 billion over lead OTPs. Sales in all retail channels the 52-week period ending April cashed in at more than $3.8 billion for 20, according to Nielsen, but it also the same 52 weeks, and refills tallied experienced declines in unit sales, more than $3.1 billion, per Nielsen. with some brands reporting double- Juul still dominates in dollar (150% digit losses. It’s too soon to determine increase for the four-week period) if the recently released ZYN nicotine and unit sales (154% growth for four pouches by Swedish Match will weeks). Vuse posted double-digit dolprovide a profitable bump. Plus, the lar and unit sales gains for the same industry continues to wait for federal period, 31% and 10%, respectively. word regarding modified risk tobacco products applications for Swedish LEGISLATIVE REACTIONS Match General snus, Copenhagen That said, indicators suggest the fine-cut moist snuff and Camel snus, e-cigarette/vaping subcategory is which many analysts believe will add reacting to regulators’ heavy hand. stability to the segment.

“Vaping is down 15%, largely due Cigars appear to follow a simi- to Juul flavors being pulled,” said Tim lar pattern. Wells Fargo Securities Greene, category director for tobacco reported sales totaled more than $3.2 at The Cigarette Store Corp., based in billion, but overall unit performance in Boulder, Colo., which operates Smoker all channels fell.

Friendly and Tobacco Depot stores, Anecdotally, it appears sales of roll- and Gasamat c-stores. your-own tobacco products remain The concern for underage access relatively flat, but lighters have been to vaping products has prompted ignited. municipalities coast to coast to issue “Lighters have done really well,” local prohibitions. Arden Hills, Minn., 26 Convenience Store Decisions June 2019

24-30_CVR_Tobacco.indd 26

is one example. City officials voted to ban sales of all tobacco flavors, including menthol and mint, from all retailers. Effective next month, the new ordinance also raises the minimum purchase age to 21. Ted Brausen estimates the new regulation could end up costing him as much as 30% in total purchases, which includes missed sales on additional basket items.

“Menthols are big here. Also, chewing tobacco is huge, and there are different flavors to that,” said the owner of Brausen Automotive, which includes a c-store in Arden Hills and two automotive centers. “We’re in the first-tier suburbs (of the Twin Cities), but customers can go to second- or third-tier suburbs where it’s still 18 and no flavor bans,” said Brausen.

“The other point is we were about to be going into a remodel, making the store bigger and modernizing it, but I’m hesitating right now. I’m waiting to see what the ban does to our bottom line,” he said.

Even more communities, along with more than a dozen states, have raised the minimum purchase age to 21, as have national drugstores and bigbox retailers after being called on the carpet by the FDA for selling to minors.

Now, federal lawmakers are speaking up. U.S. Sen. Mitch McConnell, R-Ky., announced he’ll be introducing a bill that calls for the federal tobacco purchase age to be raised to 21. A few Big Tobacco producers have even lined up their support for the legislation.

“The 18- to 20-year-old segment only makes up a small fraction of actual

cstoredecisions.com

5/24/19 5:38 AM

WARNING: This product contains nicotine. Nicotine is an addictive chemical.

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NOT FOR SALE TO MINORS: This is an age-restricted product and age verification is required at sale.

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© and TM 2019 JUUL Labs, Inc. All rights reserved.

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Cover Story

Tobacco Report

sales, and that’s why Big Tobacco companies are moving forward on 21, seemingly as a way to push back on taxes and flavor bans,” said Conley.

“Unless the House Democrats screw it up, Mitch will get it done.”

“There are currently two Dandys that operate in counties with a minimum purchasing age of 21, which has hurt sales,” said Bustin. “We’re looking for consistency and a level playing field, so if legislation is passed to bring the minimum purchasing age to 21, we’d rather that be federal or through (states) rather than several different local governments throughout our service area.”

While many in the c-store industry agree that a cohesive 21 requirement could affect the category, it’s less intrusive than the FDA’s proposed changes to its Compliance Guidance.

Basically, the new rules would require brick-and-mortar stores to prohibit sales of flavored e-cigarette, vaping and cigar products — other than tobacco, menthol and mint — by creating a 21-plus entrance or moving products to a separate area on the premises that minors could not enter.

NACS and the Society of Independent Gasoline Marketers of America (SIGMA) issued a joint formal comment protesting the proposed changes, citing evidence from the American Journal of Health Promotion, which indicates teens are far more likely to acquire e-cigarettes from vape shops than c-stores.

The associations said that the FDA’s draft guidance “will push underage consumers to retail outlets with the worst track record of compliance with age restrictions. The result will be more overall sales of (e-cigarettes) to minors rather than less.”

“We’re positioned well with our Smoker Friendly stores in that those are already 21, but the Gasamat stores are different,” said Greene.

“We would have to comply and make them either entirely 21 or cut out an entrance and make that separation.”

28 Convenience Store Decisions June 2019

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From the FDA

During his tenure with the U.S. Food and Drug Administration (FDA), former commissioner Scott Gottlieb laid out a plan to lower nicotine levels to below addictive levels, and sought to aggressively curb teen use of e-cigarettes and vaping products. Acting Commissioner Ned Sharpless has publicly committed to carrying on that mission, but many questions remain regarding the direction of federal oversight. Here, Mitchell Zeller, director of the FDA Center for Tobacco Products, provides CSD some exclusive insights.

CSD: What message do you want to share with c-store owners and operators as the FDA undergoes this leadership transition, especially in terms of tobacco regulations?

Zeller: The FDA’s work on tobacco and its commitment to its mission is ongoing and consistent. As it relates to tobacco retailers specifically, we will continue to train and educate them about federal regulations and restrictions, and take action when violations of the law occur.

CSD: What’s the FDA’s response to the argument that enforcement priorities outlined in the proposed compliance policy for premarket review requirements is specifically singling out c-stores and fuel retailers?

Zeller: The FDA is asking both manufacturers and retailers of all kinds — c-stores, vape shops, online sellers and so on — to step up to the public health challenge we are currently facing. We will not allow the upward trends in youth use of flavored e-cigarettes to continue and are looking to the industry to do their part to ensure no child can access these products. All parties should strive to have strict age verification controls in place, and we urge them to make good-faith efforts to do so.

CSD: The FDA recently sought comments on an advanced notice of proposed changes to oversight of flavored tobacco products, including cigars. What should retailers realize about the proposed regulatory modifications for flavored cigars?

Zeller: Current information shows that minors continue to use cigars due, in part, to the availability and appeal of fruit and other flavors. … Given these health concerns and use patterns, among other things, the FDA’s proposed policy changes reflect our intention to enforce the premarket authorization requirements for non-grandfathered, flavored cigars 30 days after a final guidance is in effect. This would mean some flavored cigars — those on the market as of Aug. 8, 2016, but not on the market as of Feb. 15, 2007, and not subsequently authorized for marketing — would be subject to enforcement after this guidance is final and in effect. Additionally, we are moving forward with a product standard regarding flavored cigars to address the problem more comprehensively.

CSD: What else do you want c-store retailers to know about the FDA’s Comprehensive Plan for Tobacco and Nicotine Regulation in light of the fact that their bottom lines will be impacted by additional regulations and bans?

Zeller: The FDA’s plan serves as a multi-year roadmap to better protect youth and help addicted adult smokers quit. ... As we continue to develop and implement our plans and enforcement priorities to protect public health, we will continue to do everything we can to provide transparency, consistency and predictability to all stakeholders, including affected retailers.

cstoredecisions.com

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Cover Story

Tobacco Report

While the 2018 U.S. Farm Bill removed restrictions on CBD sales at the federal level, state laws still vary, and the U.S. Food and Drug Administration has yet to weigh in.

“The FDA has not taken any formal on cannabidiol action on this proposal since the p r o d u c t s agency requested the public and c o n t a i n i n g tobacco industry to submit comments less than 0.3% on the issue by April 30. The FDA T H C , w h i c h must now review all those comments h a s a l l o w e d and then determine whether to r e t a i l e r s t o proceed with finalizing the Guidance c a s h i n o n document,” said Thomas Briant, t heir grow i n g president of the National Association popularity. of Tobacco Outlets (NATO).

CBS News Additionally, the agency wishes to reported that the U.S. move up the deadline for manufac- market is worth $600 turers to submit premarket tobacco million. The Brightfield applications (PMTAs), a requirement to Group, a market research sell tobacco products in the U.S., from firm, told the news organization Aug. 8, 2022, to Aug, 8, 2021. On that the CBD industry grew more than May 15, responding to a lawsuit filed 200% last year, even before the Farm based in Colorado, the first state to by several groups claiming the agency Bill was passed. Now, the market is legalize marijuana, Greene has long was delaying the process, a federal poised to grow at an even faster pace, sold glassware, but now sees a greater judge ordered the FDA to show the much like vaping did when it first hit variety in accessories.

“We’re starting to see different court its plan for PMTA reviews within U.S. retailers.

30 days, claiming it was derelict in “I think they are bigger than vape types of hemp papers, wraps and oversight duties. because you see CBDs everywhere, cones coming in,” he said. “There including grocery, health and pet will be opportunities there, but what those are right now, I don’t know. stores,” said Greene.

PRODUCT REPLACEMENT “We’re carrying lotions, gum- Next year, we could be talking about Not all legislation is unwelcomed.

The U.S. 2018 Farm Bill, signed into mies and cartridges, and they have something else.” law in December, removed restrictions a positive following,” said Brausen.

“The profit margin is a lot better WAITING FOR WHAT’S NEXT than tobacco, about 40% compared Perhaps the most energizing with 20%.” development to light up the tobacco SALES SPOTLIGHT Clifford also has added them to his category is the FDA approval to market Although short-term measurements stores, but voices some concern. iQOS. Altria will begin selling the heatshow vulnerabilities, a long-term review “Since state laws on CBD vary, not-burn device under the Marlboro confirms the tobacco category still is and the industry is so new, there are brand — Marlboro Heatsticks, Smooth a multi-billion-dollar performer in all retail channels. currently no true, trusted national Menthol Heatsticks and Fresh Menthol brands. I have been and will continue Heatsticks — at a flagship store in RETAIL DOLLAR SALES FOR to be very selective on which brands I Atlanta before rolling it out to other 52 WEEKS ENDING APRIL 20, 2019 choose to sell,” he said. retailers. Based on its success in “We’re confident that the products Japan and Italy, Wells Fargo Securities’ Cigarettes $59.6 billion will do well, and anything to help fill analysts predict the product could Smokeless Tobacco $6.1 billion the void and offset tobacco losses over generate approximately $4.5 billion time is a good thing,” added Bustin. by 2025.

Cigars $3.2 billion As more states eye legalizing recre“It’s always good to see new E-cigarettes $3.9 billion ational cannabis, c-stores are looking innovation come into the category,” for avenues to attract this customer said Clifford. “Hopefully it can help E-cigarette Refills $3.1 billion demographic, such as adding can- offset some of the declines from Source: Nielsen XAOC including c-store and Wells Fargo Securities LLC, April 30, 2019 nabis-related paraphernalia. Being combustible cigarettes.” CSD 30 Convenience Store Decisions June 2019

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Category Management

E-Cigarettes

Vape in FDA Crosshairs Convenience store retailers await FDA final guidance on flavor restrictions and potential national age legislation to make 21 the minimum age for vape.

Erin Del Conte, Executive Editor

I

t’s been three months since former U.S. Food and Drug Administration (FDA) Commissioner Scott Gottlieb announced draft guidance for flavored tobacco products, noting, “We expect that some flavored e-cigarette products will no longer be sold at all. We expect that other flavored e-cigarette products that continue to be sold will be sold only in a manner that prevents youth access. …“ Acting Commissioner Ned Sharpless, who replaced Gottlieb, is the director of the National Cancer Institute and also supports restrictions on e-cigarettes.

On the heels of flavor regulation, age restrictions are on the docket. More than a dozen states are raising the purchase age for tobacco to 21. U.S. Sen. Mitch McConnell, R - Ky., also proposed a federal bill to up the legal age for purchasing tobacco to 21.

This April, FDA began cracking down on manufacturers selling and/or distributing nicotinecontaining e-liquids with labeling similar to prescription cough syrups.

“My biggest concern is potential flavor regulations,” said Reilly Robinson Musser, vice president of marketing and merchandising for Rotten Robbie.

“It will reduce the choices our customers have in our stores, affect our sales and put c-stores at a disadvantage to other channels of trade, such as vape shops and the internet.”

Robinson Oil Corp.’s 34 Rotten Robbie c-stores in California sell Vuse, Juul and blu. “The pods are the best-sellers — Juul and Alto,” Musser said.

Currently, Rotten Robbie is replacing its old backbars with new shelving. “As we do that, we are reducing the amount of space allocated to cigarettes, making space 32 Convenience Store Decisions June 2019

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Fast Facts: » As e-cigs await final FDA flavor regulation, cities and states are proposing flavor bans. » Local and federal bills look to push the e-cig age to 21. » C-store retailers are already preparing for e-cig flavor bans.

cstoredecisions.com

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Category Management

E-Cigarettes

FDA Cracks Down on E-Cigs for smokeless and cigars and increasing the space for e-cigs,” Musser said.

When California upped the age for purchasing tobacco to 21, Musser noted the effect on sales was minimal.

In March, new FDA draft guidance, titled “Modifications to Compliance Policy for Certain Deemed Tobacco Products,” outlined plans: • to end current compliance policy as it applies to flavored electronic nicotine delivery system (ENDS) products such as electronic cigarettes, other than tobacco-, mint- and menthol-flavored products; • to prioritize enforcement of such products offered for sale in ways that pose a greater risk for minors to access these tobacco products; • to require manufacturers of all flavored ENDS products other than tobacco-, mintand menthol-flavored that remain on the market under these new conditions to submit premarket applications to the agency by Aug. 8, 2021.

TAKING ACTION

Already, states, cities, stores and manufacturers are taking matters into their own hands.

“We were proactive with our key supplier partners and have already eliminated most flavored products, lution on the state and federal level in especially any that appeal to minors regard to other flavors, we may reconor youth,” said Derek Gaskins, senior sider. Even when we did carry some of vice president of merchandising the other flavors, tobacco and minty and procurement for Yesway, which were the best-sellers.”

Plaid Pantry’s vape offering includes operates 150 c-stores in nine states. “ A d u l t c o n s u m e r s a re s e e k i n g several brands of vape kits, refill pods, mint, natural tobacco and other charging accessories and single use sophisticated flavors, and we plan to items. The chain doesn’t sell straight e-juice. “Brand wise, My Blu and meet their needs.”

In fact, Gaskins noted that since Juul are the top sellers,” Jones said. consolidating to only these flavors, “Customers are also leaning toward the higher nicotine level refills.” sales have been up “significantly.”

Jones expects the e-cig category to He said the segment has evolved from mostly disposable e-cigs and is see continued low-to-mid double-digit now dominated by vape and e-juice growth through 2019.

Plaid Pantry operates in markets cartridge systems, primarily Juul and Vuse, which make up about 99% of the where 21 is the legal age for tobacco and applied the rule to vape. “We expechain’s vape sales.

Plaid Pantry dedicates a four-foot rienced very little fall-off in sales when fixture to vape. Like Yesway, Plaid we implemented this decision,” he said.

What Jones is concerned about Pantry has already taken steps to comis the “overly aggressive taxation” ply with future flavor regulations.

“We have voluntarily made the being considered in both states where decision to only carry tobacco, mint Plaid Pantry operates, which “could and menthol flavors,” said Tim Jones, also create a barrier to entry for new director of marketing for Plaid Pantry, consumers attempting to switch from which operates 108 c-stores in Oregon smoking.”

In April, e-cigarette manufacturer and Washington. “Once there is reso-

E-CIGARETTE SALES SOAR E-cigarette dollar sales were up a whopping 174% year-over-year for the 52 weeks ending March 24, 2019, according to IRI. Unit sales also saw growth of 101% for the period.

ELECTRONIC SMOKING DEVICES

$ Sales

Unit Sales

Price Per Unit

Current

1-Yr % Chg

Current

1-Yr % Chg

Current

1-Yr $ Chg

$3.40 B

174.0%

241 M

101.0%

$14.11

$3.76

Source: IRI, a Chicago-based market research firm, U.S. Convenience Store All Scan Data for the 52 weeks ending March 24, 2019

34 Convenience Store Decisions June 2019

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Juul said it was testing a new program called Track & Trace, to help prevent underage vaping. Drugstore chain Rite Aid announced in April it planned to remove all e-cigs from its stores within 90 days, citing an increased number of underage youth using the products.

Many cities already have flavored e-cig bans, and multiple states are considering bills to ban flavored e-cigs. At press time, San Francisco was considering a ban on all e-cigs.

Already, the city prohibits the sale of flavored e-liquid and flavored e-cigs.

BAD NEWS The proposed ban on e-cigs from San Francisco is “bad news,” said Gregory Conley, president of the American Vaping Association, as other cities and states could see this as the model and attempt similar legislation.

But the future of flavors is the imminent concern. Conley pointed to Minneapolis, where menthol and flavors were restricted to adult-only stores in 2018, and c-stores began building a separate section or separate tobacco store attached to their c-store.

“That could be a new model, particularly in places where there aren’t tons of tobacco and vape shops, to start selling these flavors,” he said.

“But I don’t think FDA has made clear what exactly is needed. Is a curtain okay? Do you need a doorman checking ID? There’s still a lot of unanswered questions.”CSD Read more at cstoredecisions.com/ 2019/05/31/vape-in-fda-crosshairs

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Category Management

RYO

RYO THE RADAR FLIES UNDER

FDA may be focused on e-cigs, but roll-your-own tobacco still faces regulatory hurdles.

Howard Riell, Associate Editor

A

s traditional cigarettes and vape soak up the limelight with frequent news of regulations regulations and restrictions, roll-your-own (RYO) tobacco has kept a low profile, but is nonetheless subject to everexpanding rules both by the U.S. Food and Drug Administration (FDA) and local legislators.

Nationally, RYO finds itself subject to the same federal proposals that look to increase the age to purchase tobacco to 21. But as the FDA seems intently focused on flavor restrictions at present, and as RYO is unflavored, it’s not on the regulatory hot seat for now.

That hasn’t stopped local ordinances and taxes from threatening sales, however.

For example, at the state level, at the end of April, Colorado legislators put forth House Bill 19-1333, which includes a ballot measure that would, among other things, increase the other tobacco product (OTP) tax to 62% of the manufacturer’s list price, but the bill failed in the state Senate in May. Across the country in Vermont, Senate Bill 86, which increases the

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legal age for buying and using cigarettes, e-cigarettes and OTP to 21, was signed into law by Gov. Phil Scott on May 17 — making Vermont the 14th state to raise the legal age for purchasing tobacco.

“In Vermont and Connecticut, there is a 92% tax on OTP,” said Dave Simendinger, president of Champlain Far ms, Wesco Inc.’s locally-owned and operated 39-unit chain of c-stores with offices based in South Burlington, Vt. “We can’t sell much for RYO, as the 92% tax decimates the price compared to neighboring states.”

“But in general, I think RYO is a great category outside of Vermont,” Simendinger said.

Now that cannabis is legal in Vermont, Simendinger said he expects the entire tobacco category will “take a big beating” as all

the new farmers start to cultivate marijuana plants this summer.

Due to such regulatory and market forces, the RYO segment has seen growth erode. For the 52 weeks ending March 24, 2019, the c-store channel saw total RYO tobacco sales of just over $44 million, a decrease of 9.9%, according to IRI. And as the National Association of Convenience Stores (NACS) made clear in its latest ‘State of the Industry Report,’ the tobacco category — both cigarettes and OTP — has seen its contribution to overall store sales drop over the past decade, by 2.05 percentage points, from 39.80% in 2009 to 37.75% in 2018.

DEPENDS ON THE MARKET Ray Johnson, operations mancstoredecisions.com

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ager for Speedee Mart Inc., based in RYO DECLINES Henderson, Nev., said that his chain no Roll-your-own tobacco saw dollar sales fall 9.9% year-over-year, while unit sales longer carries RYO tobacco. “I used to, dropped 13.5%. and it depends on the market. When $ Sales Unit Sales Price Per Unit ROLL you are further out in the country, peoYOUR Current 1-Yr % Chg Current 1-Yr % Chg Current 1-Yr $ Chg ple still are willing to do that. When you OWN get in the city, no, they’re not.” $44.35 M -9.9% 6.35 M -13.5% $6.99 $0.28 The equation includes price and convenience, Johnson said. “You’ve Source: IRI, a Chicago-based market research firm, U.S. Convenience Store All Scan Data for the 52 weeks ending March 24, 2019 got to look at the two. If you are out in the country, people have a little more time and knowhow,” he said. “They “If (regulators) said, ‘we are going an opportunity to reset the taxawould rather drive across town to find cheaper products even if it is less con- to ease up on the RYO,’ it would tion differentiation. Fair trade pricing venient. In the city, they just be just like when (former President) laws in the U.S. are designed to proObama had the price increase, and vide a minimum price with the goal of don’t have the time.”

Speedee Mart operates pipe tobacco was exempt,” Johnson helping smaller retailers, and later of 22 c-stores and plans to said. “Suddenly every loose tobacco reducing smoking.

Some 25 states, including open two more stores later product became pipe tobacco, even though none of it was. They just put a Pennsylvania, New Jersey, New this year.

I n l a r g e m e a s u r e , new bag on it, and that category sky- York, Minnesota, Indiana, Mississippi, Johnson said, the category’s rocketed for a couple of years until the South Dakota and Nebraska, have fortunes remain in the hands government figured out what every- fair trade laws specifically addressing cigarette sales. of the regulators. “The gov- body was doing.”

In those days, automated machines “RYO gives you a good value propernment decides, based on how they tax things. And at popped up, and customers could osition,” Askwith said. He added that it this point, it’s not worth the crank out a whole carton of ciga- helps c-stores compete in various areas, effort on the average per- rettes in minutes and avoid the taxes such as with stores located on Native associated with traditional cigarettes, American reservations, which don’t son’s part.”

But change is always possi- Johnson recalled. But those days have the same tax requirements for trable. Should a significant price difference are long over. After about two years, ditional cigarettes. “That is especially true when you have markets like New between RYO and cigarettes appear bureaucrats put a stop to it.

Today, Johnson said that in his York, Pennsylvania, Massachusetts, again, Johnson said, RYO would take experience, RYO is a must for stores and other places where cigarette center stage. located in more rural areas. prices are so high that RYO has a much better price point,” Askwith said.

As Askwith pointed out, “Cigarettes GOOD VALUE PROPOSITION Other c-store operators have also are a very cheap thing to make; what noted RYO plays best in rural stores, kills you is taxes. In New York City espe» For the 52-week period endwhile in other locations it often does cially, where you’re looking at $43.50 ing March 24, 2019, the c-store for a carton of cigarettes, roll your own not warrant the required shelf space. channel saw total RYO tobacco sales of just over $44 million, a Mike Askwith, chief operating offi- makes your price a lot cheaper.” decrease of 9.9%, according There are great opportunities for cer for Power Buying Dealers (PBD) to IRI. USA Inc., of greater Chicago, disagrees RYO in places with high cigarette taxes, entirely with that theory based on what like California and Illinois, Askwith said. » In fair-trade state markets, retailAt the end of the day, geography he’s seen in his markets. PBD includes ers have an opportunity to reset can make the difference, he added.

25 owned and franchised locations in the cigarette taxation differentiaGrowing RYO sales is a matter of Illinois, Georgia and Florida. tion by offering RYO. Askwith said he doesn’t believe having a strong product mix, sharp c-store retailers should discount RYO, merchandising, value pricing and » As RYO is unflavored, it’s not the focus of FDA crosshairs for now. especially when it comes to fair trade related accessories such as papers, state markets, in which retailers have tubes and injectors. CSD

Fast Facts:

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June 2019 Convenience Store Decisions 37

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HYATT REGENCY — Minneapolis

September 8-11, 2019

NAG 2019 at the beautiful Hyatt Regency Minneapolis Minneapolis, Minnesota

Committed to building profits and relationships!

The National Advisory Group (NAG) is an association of small, mid-sized and familyowned c-store chains and the executives that run them. This exclusive, member-driven group convenes annually to exchange ideas with the motivation to improve their business performance and ultimately their bottom line.

The setting of this conference encourages an extremely educational, yet highly social environment. The schedule consists of topnotch speakers, retail information exchanges, opportunities to address burning issues within your business, a chance to get to know your peers in similar size operations and much more!

FOR MORE INFORMATION: RETAILERS should contact John Lofstock 201.837.2177 • jloftsock@csdecisions.com

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SUPPLIERS should contact John Petersen 440.250.1583 • info@nagconvenience.com

5/24/19 AM 5/24/19 10:16 2:14 PM

BURNING ISSUE 1

Local Lobbying: Why your voice matters more than ever.

Whether it's increasing tobacco taxes, rising minimum wages, fuel regulations or credit card fees, convenience store owners need to make their voices heard on the important issues integral to store sales. Lobbying is an essential part of our democratic system and can help bring about change. This session will delve into how convenience store owners can make their voices be heard with lawmakers at the local and state levels to influence change that is good for business.

Moderator: Tom Briant, Executive Director, National Association of Tobacco Outlets (NATO)

BURNING ISSUE 2

How Cashier-less Sites Will Impact the Convenience Store Industry. Amazon and other cashier-less concepts are no longer a novelty. They are fast becoming destinations in markets such as San Francisco, Seattle and Chicago, and they are challenging conventional convenience stores in the race for time-pressed customers. Beyond retail competition, the concept is also changing consumer behavior to expect a frictionless experience.

While some municipalities are passing laws to require stores to accept cash, convenience store owners must develop a strategy to compete with this emerging trend.

BURNING ISSUE 3

Equipped for Foodservice Success: How to execute a successful foodservice strategy in small spaces. Space limitations used to be the bane of convenience store operators who wanted a professional foodservice program.

But now manufacturers are stepping up to the plate with equipment that serves multiple purposes and still fits nicely within the c-store footprint. Choosing the right equipment can often be an overwhelming task given the range of options available, so retailers must also focus on cost, machine life, maintenance and ROI considerations.

BURNING ISSUE 4

Developing Your Digital Strategy: How artificial intelligence is impacting retail. The hype around artificial intelligence (AI) has never been higher and one industry where it has a chance to make a major impact on profits is retail. From interpreting data to predicting sales needs, artificial intelligence is redefining retail.

This panel will discuss how a digital strategy ties into all aspects of the store including loyalty, the back-office and the POS system. It will also discuss how retailers can use AI to engage customers through communication and experiences, better manage inventory and price products optimally.

Moderator: Paul Roetzer, Founder and CEO, The Marketing Artificial Intelligence Institute

BURNING ISSUE 5

The Importance of Family Values in the Convenience Store Industry. Family-owned small businesses are the backbone of our economy. They provide 55% of all jobs in the U.S. and 54 percent of U.S. sales, according to the Small Business Administration.

Strong family values can prove extremely productive in business and this is evident in the convenience store and petroleum industries. Family businesses have left an indelible impression on convenience store chains across the country by providing outstanding leadership, innovation and stability in the communities they serve. In this session, we will hear how three unique chains have made their mark on the convenience store industry.

Moderator: John Lofstock, Executive Director, NAG Speakers: Margaret Dinneny, Chief People Officer, Wawa

BURNING ISSUE 6

Merchandising and Marketing for Success: What are your customers looking for? From foodservice to the cold vault, customers see c-stores as a destination, but how closely do you track where they go once they enter your store? New technology, such as heat maps integrated with high-resolution cameras, allow retailers to see where customers are going, what they are looking at and how much time they spend in each area of the store. This data can help c-stores design integrated merchandising plans to drive sales.

Moderator: John Matthews, President and CEO, Gray Cat Enterprises Speakers: Kyle Schrader, Schrader Oil

YEO BREAKOUT SESSION

How Millennial Insights Can Connect Your Brand with Customers Speaker: Linda McKenna, Managing Partner, EPS Inc.

OPERATIONS BOOT CAMP:

Best practices and a conference wrap up with John Lofstock, Executive Director, NAG, and Brian Unrue, Vice President of Operations, Clark's Pump N Shop.

* Speakers confirmed through March 25.

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5/24/19 10:16 2:16 PM 5/24/19 AM

HYATT REGENCY — Minneapolis

September 8-11, 2019 NAG 2019 BREAKOUT SESSIONS

1) New and Emerging Fuels. Shell's push into hydrogen and electric vehicles, plus the push to expand E-15/ethanol sales, could change the retail landscape on fuel.

Moderator: Bob O'Connor, President, Jetz Convenience Centers

4) Foodservice: Forecasting demand. Leading convenience store chains avoid waste to stay more profitable. Hear how the experts learn to predict foodservice demand.

2) HR: There's an app for that. From scheduling to communicating with employees, there's an app to maintain constant contact with your employees and your customers.

Learn how c-store chains are using technology to navigate rising wages and win the best store talent.

5) How is Industry Consolidation Changing the C-Store Industry? Change is inevitable. Should you be buying stores? Is selling the right thing to do for your family businesses? How is vendor consolidation affecting costs?

This breakout session will help c-stores get answers to these tough questions.

3) The Future of CBD and Vape. What the future holds for this growing category and how FDA regulations can impact sales.

Moderator: Tom Briant, Executive Director, National Association of Tobacco Outlets (NATO)

6) LEED Certification and Embracing the Green Movement.

Your customers, especially Millennials, want your brand to stand for something in order to gain their business. LEED Certification and marketing local products help earn their business.

Join us in

SEPTEMBER!

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HOW TO REGISTER

Go to: www.nagconvenience.com. You will receive a confirmation email after completion.

HOTEL PRICING

A block of rooms has been reserved for the NAG Conference at these special rates: • Standard rooms at $199/night • Golf rate is $150 for golf and $25 for club rentals As the convenience store and petroleum industry continues to evolve, training the leaders of tomorrow is more important than ever before. To help young executives have a group that is solely focused on exchanging personal experiences with peers in their age group, the National Advisory Group (NAG) is proud to announce that it has relaunched the Young Executives Organization (YEO).

YEO’s mission is to cultivate young talent in the convenience store and petroleum industry through implementation of education and networking. YEO accomplishes this mission by leveraging the experience of NAG members to help foster superior leadership skills.

YEO members are industry leaders who are approximately 40 years of age or younger. Members are entrepreneurs, leading top businesses and actively pursuing a higher level of professionalism in the convenience store and petroleum industry.

Membership in YEO provides young convenience store and petroleum industry executives with an opportunity to network with other NAG members and influential industry leaders. It also gives young executives a platform to express their idea, leadership abilities and vision for the future of convenience retailing.

Your hotel costs are NOT included in the cost of the conference and should be booked through the NAG Hotel Block at the Hyatt Regency (https://www. hyatt.com/en-US/group-booking/MSPRM/G-HARB).

Please make your room reservation by 8/16/19.

CONFERENCE REGISTRATION RATES

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

Membership in YEO is open to all NAG-member company employees at no cost. If you are not a NAG Member, joing NAG now at www.nagconvenience.com. If you are a young executive or if your operations has a young up-and-coming executive please join us in 2020.

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

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Category Management

Cigarettes

Is Menthol

FDA’s Next

Target?

Cigarettes aren’t FDA’s immediate regulatory focus, but potential menthol regulation looms, while age restrictions and new taxes persist.

Pat Pape, Contributing Editor

I

n April, Scott Gottlieb resigned as commissioner of the U.S. Food and Drug Administration (FDA), causing some observers to speculate that the agency would back off on the pressures his two-year tenure put on the tobacco industry.

But when Ned Sharpless, former director of the National Cancer Institute, was named acting FDA head, he quickly dismissed that notion. “Let me dispel any misconceptions that the change in leadership reflects some desire of the president or the secretary for the FDA to go in a different direction from the Gottlieb era,” he said.

MENTHOL IN PURGATORY Last year, in a public statement issued on Nov. 15, Gottlieb announced the FDA “ … will advance a Notice of Proposed Rulemaking that would seek to ban menthol in combustible tobacco products, including cigarettes and cigars … ” citing that youth smokers were more likely to use menthol cigarettes than any other age group.

FDA’s website notes more than 19.5 million people currently smoke menthol cigarettes. SwiftIQ data presented at the National Association of Convenience Stores (NACS) State of the Industry (SOI) Summit showed menthol cigarettes account for 35% of cigarette unit sales and 34% of cigarette dollar sales.

“I’m deeply concerned about the availability of 38 Convenience Store Decisions June 2019

38-40_CM_Cigarettes.indd 38

Fast Facts: » More than a dozen states and more than 450 local governments have upped their minimum smoking age from 18 to 21. » In November, FDA stated it will seek to ban menthol in combustible tobacco products, including cigarettes. » Since 2002, 48 states and the District of Columbia have increased cigarette tax rates 136 times.

cstoredecisions.com

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Category Management

Cigarettes

menthol-flavored cigarettes,” Gottlieb wrote in November. “I believe these CIGARETTE UNIT SALES SLIDE menthol-flavored products represent Cigarette dollar sales were flat for the 52 weeks ending March 24, 2019, one of the most common and perni- according to IRI, while unit sales dropped by 3.1% year-over-year. cious routes by which kids initiate on $ Sales Unit Sales Price Per Unit combustible cigarettes.”

Current 1-Yr % Chg Current 1-Yr % Chg Current 1-Yr $Chg CIGARETTES But in March, new FDA draft guidance, titled “Modifications $55.95 B -0.4% 7.9 B -3.1% $7.00 $0.19 to Compliance Policy for Certain Source: IRI, a Chicago-based market research firm, U.S. Convenience Store All Scan Data for the 52 weeks ending March 24, 2019 Deemed Tobacco Products,” shifted the focus to vape and e-cig flavor restrictions to curb what the FDA has referred to as an “epidemic” of under- Convenience Store Association of lator proposed a bill that would halt age use of flavored electronic nicotine Kansas, believes the proposed FDA the sale of all cigarettes in the state regulations to prevent youth access are by increasing the minimum age for delivery systems (ENDS).

But that doesn’t mean the FDA unnecessary, especially since the Kansas tobacco purchase to 30 in 2020, 40 has forgotten about menthol ciga- association’s membership has a 92% in 2021, 50 in 2022, 60 in 2023 and rettes. Last November, Gottlieb noted, compliance rate during sting operations. 100 in 2024. Although the bill received “The convenience industry in our plenty of publicity, it died in commit“Unlike menthol-flavored ENDS, there’s no evidence to suggest that menthol- state is doing an excellent job of tee. The legislator still wants the age flavored cigarettes may play a role in compliance,” Zaremba said. “We limit raised to 25. understand the regulations, adhere to harm reduction for adult smokers.”

While retailers await potential action them and believe in them. We want to TAX HIKES from FDA on menthol, some cities are abide with the laws on the books.”

Since 2002, 48 states and the Lisa Dell’Alba, president and CEO District of Columbia have increased already taking action.

Minneapolis banned sales of men- of Square One Markets based in cigarette tax rates 136 times, the thol products in c-stores in 2018, Bethlehem, Pa., agrees the conve- Campaign for Tobacco-Free Kids, an restricting sales to tobacco shops nience industry has acted responsibly advocacy organization, reported in and liquor stores, which do not sell to in selling age-restricted products and December 2018. While the average minors. San Francisco has also banned should be allowed to continue to do so. state cigarette tax is $1.79 per pack, “I would be very concerned if that the highest combined state-local tax flavored tobacco sales, including menthol. In April, Sacramento banned particular category was not something rate per pack is $6.16 in Chicago, folmenthol cigarettes along with flavored we are able to offer our customers,” lowed by New York City at $5.85. e-cigarette cartridges, and other fla- Dell’Alba said. “I agree with the FDA’s In April, Colorado HB19-1333 vored tobacco products, effective Jan. concerns about keeping these types of would have asked voters to approve 1, 2020. California Senate bill SB38 products out of the hands of kids, but upping the tax on a pack of cigarettes aims to ban flavored tobacco, including I think we’re being unfairly targeted as to $2.49 from 84 cents and add a 62% menthol cigarettes. New York City is an industry.” tax on all nicotine products, but the also weighing a menthol cigarette ban. bill died in the Senate in May. Illinois In May, the city council of Beverly THE SMOKING AGE lawmakers discussed in May plans to Hills, Calif., proposed eliminating the According to the Centers for increase the state’s cigarette tax $1 per sale of all tobacco products except in Disease Control and Prevention, 90% pack ­— three times higher than the cigar lounges and luxury hotels. of cigarette smokers smoked their first 32-cent increase the state’s governor But c-store retailers argue the cigarette before age 18, and a move- proposed. Despite regulatory barriers, c-store industry is already on the front- ment is underway to up the smoking cigarettes were still the top merchanlines of preventing youth access to age to 21. Already, more than a dozen dise category at c-stores in 2018, tobacco products, including flavored states and more than 450 local govern- according to NACS SOI Summit data. e-cigs and menthol cigarettes, making ments have passed bills to increase the Chicago-based research firm IRI bans and regulations excessive. legal age to buy tobacco to 21, and found cigarettes brought in $55.95 Scott Zaremba, president of Zarco Congress is considering similar action billion dollars in the 52 weeks ending USA in Lawrence, Kan., and a mem- on the federal level.

March 24, 2019, with unit sales down ber of the Petroleum Marketers and In February, a Hawaii state legis- 3.1% year-over-year. CSD 40 Convenience Store Decisions June 2019

38-40_CM_Cigarettes.indd 40

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Category Management

Cigars

Cigars Await

Future

Regulation Cigar sales are up a healthy 7% year-over-year at c-stores, but potential flavor and age regulations loom.

Howard Riell, Associate Editor

C

Fast Facts: » More than 13 states have enacted laws to up the legal age to buy tobacco products to 21. » C-stores saw total cigar sales of just under $3.5 billion, up 7%, for the 52 weeks ending March 24, 2019, according to IRI. » Flavored cigars introduced after 2016 without FDA approval will be subject to enforcement/removal, according to FDA draft guidance released in March.

42 Convenience Store Decisions June 2019

42-44_CM_Cigars.indd 42

igars — both mass market and, increasingly, premium varieties — remain popular in convenience stores, but dark clouds continue to gather over the segment in the shape of potential restrictions.

For the 52-week period ending March 24, 2019, the c-store channel saw total cigar sales of just under $3.5 billion, a healthy 7% increase, according to IRI. “As the tax burden imposed on cigarettes continues to increase, some consumers are starting to consider switching to cigars,” noted Nathaly Gonzalez, communications associate for Euromonitor International.

Cigars continue to record steady volume growth, Gonzalez added. Value growth has accelerated and is expected to remain strong throughout the next five years. “As economic prospects improve in the U.S., the appeal of fine-cut tobacco, a relatively affordable option among tobacco products, has weakened, with many consumers reverting back to regular cigarettes.”

REGULATORY WOES Potential turbulence, however, sits just ahead. Last year, the U.S. Food and Drug Administration (FDA) started soliciting opinions and feedback on its plans to regulate cigars in the U.S. by issuing an Advanced Notice of Proposed Rulemaking for premium cigars.

The agency will solicit information and opinions from customers and industry professionals alike as part of its stated intention to reconsider regulating premium cigars, Gonzalez said.

“The possibility of reversing its decision on regulating premium cigars comes about in the context of new leadership at the FDA, which claims to be pro-business and anti-regulation,” he added.

Changes to the legal purchasing age for cigars are also on the horizon.

In late April, U.S. Senate Majority Leader Mitch McConnell, R-Ky., a n n o u n c e d p l a n s t o i n t ro d u c e legislation in the U.S. Senate to raise the nationwide minimum age to buy cstoredecisions.com

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Category Management

Cigars

tobacco products from 18 to 21. products out of the hands of minors.

“Youth usage numbers have been The bill covers all tobacco products, going down across the country,” including vaping devices.

W h e n p r o p o s i n g t h e b i l l , Williamson said. “There is no need McConnell pointed out that 12 states to penalize an industry that has been had already enacted laws to raise the very compliant with all the rules and purchasing age of tobacco products regulations that have been passed.”

When it comes to flavored cigar to 21. “These bills will serve as helpful guidance as I craft my federal legisla- regulation, Williamson pointed out that flavored alcohol has not been tion,” he said.

At press time, Vermont was the threatened with regulation in the same latest state to decide to up the way as tobacco. “What they want to purchase age for tobacco to 21, pick on is mass-market cigars that have with more states expected to follow a flavor, and adults should be able to close behind. Numerous cities and use products that have flavors.”

Still, the remainder of 2019 should other localities have enacted similar be uneventful, Williamson predicted, legislation.

“Right now we are working our while 2020 could conceivably see an hardest,” said Craig Williamson, FDA move or an unfortunate turn in president of the Cigar Association the association’s court case.

CIGAR SALES RISE Cigar dollar sales are up year-over-year for the 52 weeks ending March 24, 2019, according to IRI. Unit sales also increased 4.7% for the same period.

$ Sales CIGARS

Unit Sales

Price Per Unit

Current

1-Yr % Chg

Current

1-Yr % Chg

Current

1-Yr $ Chg

$3.5 B

7.0%

2.37 B

4.7%

$1.47

$0.03

Source: IRI, a Chicago-based market research firm, U.S. Convenience Store All Scan Data for the 52 weeks ending March 24, 2019

of America Inc. (CAA) in Washington, FLAVOR BAN PREDICTIONS D.C. “We have a lawsuit that we have Ed Kashouty, owner of several filed in U.S. federal court (against the Exxon-branded c-stores in Brick FDA’s Deeming rule), which has been Township, N.J., and cigar maker/retailer there now for about two years, and Hiram & Solomon Cigars, expects the we keep commenting on FDA restric- FDA will ban sales of flavored cigars tions on flavorings dealing with cigars. and that flavored cigars will disappear Right now nothing has changed. Time from the market once the FDA ruling will tell.” arrives. “It could be today, it could be CAA is also monitoring bills in the tomorrow, it could be next year. We are House and Senate that aim to up the just waiting for them to pop in any minage to purchase tobacco to 21. While ute,” Kashouty said. some CAA members are ambivalent Energy and Commerce Chairman about age restrictions, others care Frank Pallone, Jr., D-N.J., and Rep. very much, Williamson said — not Donna Shalala, D-Fla., filed a measure just because of the impact on sales, that would place restrictions on but because the industry has been premium, handmade cigars, including complying fully with regulators to keep banning all internet cigar sales, and 44 Convenience Store Decisions June 2019

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making the sale of flavored cigars in any form illegal. Titled “Reversing the Youth Tobacco Epidemic Act of 2019,” the April 16 ordinance also seeks to raise the federal legal age to purchase tobacco to 21, while boosting user fees collected by the FDA. With the release of its latest draft guidance in March, the FDA said: “We expect some flavored cigars will no longer be sold.” Flavored cigars introduced after 2016 without FDA approval will be subject to enforcement/removal.

About 50% of cigar dollar sales come from flavored cigars, excluding menthol, according to SwiftIQ data presented at the National Association of Convenience Stores (NACS) State of the Industry Summit in April.

“A flavor ban would be the biggest blow to the category,” said Jeremy Weiner, category director for cigars for Smoker Friendly and Tobacco Depot in Boulder, Colo. “All major manufacturers have a large portfolio of flavored products. The category will still be viable, but sales and product selection will be much smaller.”

Legislation on all levels of government not only hurts cigars, but also threatens the entire tobacco industry, Weiner added. “Since a large portion of the domestic cigar manufacturers’ portfolio is flavors, I would see it hurting the category tremendously, because there would be less variety.”

C-stores should prepare for the reality that flavored cigars may not be available in the future, Weiner warned.

“But in the meantime, try to provide as much variety as possible from the top domestic cigar manufacturers.”

Another concern is that flavoredcigar customers may not return to non-flavored cigars. “I do not think that you can gain back 100% of the lost sales,” Weiner said. “You can only hope people that enjoy smoking cigars will switch to traditional non-flavored cigars, since flavors will not be available.” CSD

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5/24/19 6:06 AM

*

www.djarumcigar.com WARNING: This product can expose you to chemicals including tobacco smoke, which is known to the State of California to cause cancer and birth defects or other reproductive harm. For more information go to www.P65Warnings.ca.gov.

Ask your Phillips & King representative for details at 1-800-532-4427 *Nielsen AOD: Total US Convenience. Dollar Sales: Filtered Cigar Category, 52 Weeks 2/23/19

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WARNING: Smoking cigars causes lung cancer, heart disease, and emphysema, and may complicate pregnancy.

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Category Management

Smokeless

Smokeless

Sees Opportunity Still an important piece of the category, industry and regulatory forces could aid moist and spitless products.

Thomas Mulloy, Senior Editor

W

hile smokeless tobacco like moist snuff and spitless snus are but a tiny fraction of tobacco sales, a number of health, regulatory and market forces could be lining up to give smokeless a boost.

According to the U.S. Federal Trade Commission’s Smokeless Tobacco Report for 2016, the five major U.S. smokeless tobacco manufacturers spent $759.3 million on smokeless tobacco advertising and promotion in 2016, an increase from $684.9 million spent in 2015. That amount dropped to $718.3 million in 2017.

Yet, sales of both moist and snus are on the rise. And that trend is projected to continue.

Globally, the smokeless tobacco market is expected to register a Compound Annual Growth Rate (CAGR) of 4.7% during the forecast period, 2018 to 2023, according to a Mordor Intelligence Smokeless Tobacco Study released in March of this year. Cigarettes make up 89% of the world’s tobacco sales, according to Global Tobacco Market Report by international market research provider Euromonitor International. All others, including e-cigarettes, make up 9%, with smokeless accounting for just 2% of sales.

Those numbers tend to bear out at the local retail level.

“Basically, in the next few years, we expect to sell more snus than we have, but it’s a really small part of our business right now,” said Dyson Williams of Dandy Mini Marts, based in Sayre, Pa., with 64 stores in New York and Pennsylvania. “We carry Camel Snus now, and we’re pretty much exclusive with them other than four stores that do … Swedish Match’s … General.”

Snus maker Swedish Match is also now selling its spitless nicotine product that is consumed just like snus but with no tobacco. It’s called ZYN. “It’s a non-tobacco nicotine pouch,” said Mike Clifford of Clifford Fuels. “I think they’re trying to make

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Fast Facts: » Three smokeless products are currently before FDA for Modified Risk Tobacco Product status. » The global smokeless market expects annual growth of 4.7% through 2023. » As the market evolves, new smokeless products featuring CBD and/or THC are debuting.

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Category Management

Smokeless

it like, similar to a snus but little, you know. They’re shooting for a more simple, pure product.”

Swedish Match recently broke ground on a $100 million expansion of its plant in Owensboro, Ky. Nearly half of the additional 34,000 square feet will be dedicated to the production of ZYN, which began rolling out nationwide in April after an initial soft launch in a limited number of retail stores in Colorado, later expanding to 14,000 stores in 11 Western states. The same plant already produces several brands of moist snuff and chewing tobacco.

A few retailers told CSD they are concerned that pharmaceutical companies may perceive nicotine pouches as no different than their prescription nicotine delivery systems and demand they meet the same regulatory requirements.

With the shifting legal landscape a ro u n d c a n n a b is a nd g rowing number of products like CBD-infused waters, lotions and gummies, to name a few, it’s not surprising to hear of new Cannadips, a smokeless CDB snus product out of Humboldt, Calif. Cannadips’ three flavors — American, citrus and mint — also contain 150 milligrams of THC (tetrahydrocannabinol), and are designed to get users high. Only the mint flavor offers the option of either THC or the CBD-only variety, which does not have psychotropic effects.

At Dandy, Williams said despite a growing array of smokeless options, the chain has been carrying mostly Smokey Mountain for nearly 20 years and sees no need to bring in any other brand.

“We’re pretty happy being exclusive with Smokey Mountain for now,” Williams said. “There’s not that much demand where we’re ready to bring in a competitor yet.”

SMOKELESS TOBACCO SALES CLIMB Smokeless tobacco sales were up almost 5% for the 52 weeks ending March 24, 2019, $ Sales Unit Sales Price Per Unit according to IRI. Spitless tobacco, with dollar sales up almost 26% and unit sales up SMOKELESS 18% year-over-year, led the way.

Current 1-Yr % Chg Current 1-Yr % Chg Current 1-Yr $ Chg

TOBACCO

$7.26 B

4.9%

1.39 B

-0.8%

$5.22

$0.28

Chewing Tobacco/ Snuff

$6.81 B

3.7%

1.30 B

-1.8%

$5.23

$0.28

Spitless Tobacco

$439 M

25.9%

87.02 M

18.0%

$5.05

$0.31

Source: IRI, a Chicago-based market research firm, U.S. Convenience Store All Scan Data for the 52 weeks ending March 24, 2019

Smoke-free Alternatives Association (CASAA). He expects as people move away from smoking cigarettes, more people will gravitate toward moist snuff and snus pouches.

“Smokeless tobacco is sort of the original harm reduction product for smoking,” said Clark. He also said health risks for smokeless tobacco use are minimal. He pointed out that, in June, smokeless tobacco was conspicuously absent from the American Cancer Society (ACS)’s list of 17 risk factors for cancer. Many in the industry see that as a subtle signal that the ACS is ready to say that smokeless presents a minimal cancer risk.

“We want to make sure that people who smoke can find these products, they’re aware of these products, and that they can use them in a way that gives them an advantage to using these products over traditional combustible products,” said Clark.

The landscape is certainly shifting, especially considering the April 30 approval by the U.S. Food and Drug Administration (FDA) of the sale of Altria’s IQOS device. The agency, however, did not rule on the separate iQOS application for Modified Risk Tobacco Product (MRTP) status.

The FDA is also currently reviewing the MRTP applications of Swedish HARM REDUCTION Alex Clark is the CEO of the 250,000- Match’s General Snus, R.J. Reynolds’ member Consumer Advocates for Camel Snus and U.S. Smokeless 48 Convenience Store Decisions June 2019

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Tobacco’s Copenhagen Snuff Fine Cut. It’s unclear whether the FDA will approve any or all of those applications, but the momentum seems to be shifting toward the side of smokeless products.

Philip Morris has indicated it may exit the cigarette business altogether.

According to its 2018 Annual Report, the company is making plans for a major shift away from tobacco. The report noted the company is building its future on smoke-free products.

Whether these events are pointing to a gradual shift by smokers to smokeless tobacco remains to be seen. The trend seems to be moving in favor of smokers replacing combustible cigarettes with a less risky product or as a step toward quitting tobacco altogether.

According to a Fact.MR report, “Smoking Cessation Products Market Forecast, Trend Analysis & Competition Tracking – Global Market Insights 2018 to 2028,” the smoking cessation market grew by 12% year over year from 2017 to 2018. The same report projects the market will grow at a 10.8% CAGR through 2028.

As of right now, smokers are more apt to switch to e-cigarettes to quit, especially young adults. But with uncertain regulatory pressures and more new products hitting the market, there’s no telling if or how much smokeless sales will surge. CSD

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Category Management

Tobacco Accessories

Lighters

Lead the Pack Retailers are waiting to see if CBD, cannabis light a fire under tobacco accessories sales.

Thomas Mulloy, Senior Editor

W

hen it comes to tobacco accessories, what’s the first thing that clicks in your head? If you said lighters, you’re not alone. Colorful lighters at a value price point are notorious for enticing customers to make last-second impulse purchases at the front counter. Lighters still compose the bulk of accessories sales at most c-stores, but expanding accessories opportunities may be on the way.

While dollar sales for the tobacco accessories category rang in at $273 million for the 52 weeks ending March 24, 2019, according to Chicagobased research firm, IRI, the average unit price was under $2. But as accessories expand, average unit prices may be rising.

With changes in the tobacco industry and a budding patchwork cannabis market, there’s little doubt that the number and types of accessories will present avenues for sales growth. The question is: Which accessories?

“Torch lighters are big,” said Ray Johnson, operations manager of the Speedee Mart chain with 23 locations throughout Las Vegas.

That’s probably because they’re so versatile: windproof, adjustable, durable and refillable.

While many torch lighters come with a cigar punch built in, consumers don’t just buy them for lighting tobacco; they’re good for outdoor uses like camping, household work and even cooking.

Torch lighters can be disposables for a couple of dollars, or for $25 and up, there are blow50 Convenience Store Decisions June 2019

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torch rivaling, heavy-duty units with ignition lock that’ll stay lit for 30 minutes.

Most are fueled by butane and are refillable, so stocking the butane will bring some piggyback sales.

CARTRIDGES AND MODS Another growing accessory market can be found in alternatives to combustible cigarettes, including cartridges for e-cigs, and box mods (modified e-cigs) with adjustable wattage.

Mods can retail for a couple hundred dollars or more, depending on their sophistication.The best course for retailers may lie somewhere in between pocket vapes and vape pens with more options than e-cigs, but a much lower price than mods.

Meanwhile, in states that have passed more lenient cannabis legislation, suppliers are now offering CBD liquids that work in vaping units. » In markets where cannabis is

Fast Facts:

PAPERS TO SKYROCKET Johnson sees new sales opportunities in CBD products. “We have added CBD papers and CBD cartridges,”he said.

legal, rolling paper sales are expected to climb.

» The rise of vape and CBD offer new accessories options.

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5/24/19 6:10 AM

Lou Maiellano, of TAZ Marketing and Consulting Group, said bigger c-store chains may be shy about prominent placement of certain accessories associated with cannabis or CBD, but some independents have no qualms.

For stores in states that have legalized marijuana, rolling papers may be the next accessory to fly high.“Yeah, there’s growth in papers,” said Maiellano. “There’s new opportunities.”

Maiellano said that there are a few paper manufacturers looking to enter the U.S. market that had been dominated by just a few rolling paper brands. The most popular “newcomer” is RAW Natural Rolling Papers, who, after a decade, is a firmly established option. RAW bills itself as an all-natural product that is not only unbleached, but “unrefined.” RAW’s website states that its papers are made of just plants

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ACCESSORIES SALES FLAT Tobacco accessories saw flat dollar sales year-over-year for the 52 weeks ending March 24, 2019, according to IRI. Unit sales saw a dip of 1.1%, but new opportunities in CBD and cannabis accessories could mean a bright future for the segment.

SMOKING ACCESSORIES

$ Sales

Unit Sales

Price Per Unit

Current

1-Yr % Chg

Current

1-Yr % Chg

Current

1-Yr $ Chg

$273 M

-0.2%

152.5 M

-1.1%

$1.79

$0.02

Source: IRI, a Chicago-based market research firm, U.S. Convenience Store All Scan Data for the 52 weeks ending March 24, 2019

and plant starch — no chalk, no dyes, no burn additives. It’s been called the first “vegan” rolling paper.

There are more varieties, too. Pouch brand papers feature a small pocket to make it easier for beginners to roll.

High Hemp and Rizla are two of many papers made from 100% hemp — and some contain CBD. Trip is a clear cellulose paper billed as “tree-free.”

Growth in the rolling papers mar-

ket, especially in states new to legal cannabis, could be blunted by market overlap from consumers already rolling their own illegal marijuana cigarettes.

While new market avenues in accessories may seem like the Wild West, those with the most general appeal that can move quickly and easily with a reasonable margin will likely do best at c-stores. Expect product manufacturers to target this growing need. CSD

June 2019 Convenience Store Decisions 51

5/24/19 6:11 AM

CONSIDERING CBD CBD offers new opportunities for c-stores, but the regulatory future remains uncertain.

Howard Riell, Associate Editor

T

Fast Facts: » The Food and Drug Administration is reviewing regulations that govern the use of CBD, which could lead to a reconsideration of how CBD is regulated. » Wellness and beauty products that incorporate CBD are becoming increasingly popular. » CBD contains no THC, so it doesn’t make consumers “high,” but it is said to reduce pain and anxiety.

52 Convenience Store Decisions June 2019

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he CBD market is expected to skyrocket over the coming years, driven by strong demand from consumers for wellness products, favorable regulatory momentum spurred by the passage of the 2018 Farm Bill and mounting investment by major corporate players.

CBD, short for cannabidiol, comes from the cannabis plant, but contains no THC, so it doesn’t make consumers high. CBD has been hailed for potentially reducing symptoms of anxiety and chronic pain.

In early April, the U.S. Food and Drug Administration (FDA) announced that a review of regulations that govern the use of the cannabis derivative CBD could lead to a reconsideration of how CBD is regulated. The agency plans to organize a high-level, internal agency working group “to explore potential pathways for dietary supplements and/or conventional foods containing CBD to be lawfully marketed, including a consideration of what statutory or regulatory changes might be needed and what the impact of such marketing would be on the public health.”

At press time, a public hearing was also set for May 31, to allow stakeholders to share their experiences and challenges with these products, including on product safety.

“While the availability of CBD products in particular has increased dramatically in recent years, open questions remain regarding the safety considerations raised by their widespread use,” former FDA Commissioner Scott Gottlieb noted. “It’s critical that we address these cstoredecisions.com

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Category Management

unanswered questions about CBD and other cannabis and cannabisderived products to help inform the FDA’s regulatory oversight of these products.”

VARIED REACTIONS CBD-infused items that fit naturally into the c-store channel can include disposable vapes, pre-rolls, beverages — including single-serve tea bags that can be steeped at the store — mints/candy/gum, lip balms and even patches. Both Molson Coors and Constellation Brands are participating in the Canadian market.

C-store retailer reactions to the coming of CBD products vary.

A spokesperson for 7-Eleven Inc., for example, told CSD in a statement, “7-Eleven Inc. does not support or promote the sale of cannabis-based products, including those with cannabidiol (CBD).”

Others, however, have not only begun adding CBD items, but are already seeing encouraging results.

“As the product becomes more and more accepted and understood — that there isn’t any THC in the product — the sales will continue to grow,” predicted Jon Fleck, merchandising manager for Cenex Zip Trip in Spokane Valley, Wash., which operates 36 Cenex Zip Trip retail locations in Minnesota, Montana, North Dakota, South Dakota and Wyoming.

“Whether it’s word of mouth or from the news that some Walgreens and CVS drug outlets are placing it into their stores, consumers are becoming more open-minded and seeing the benefits of this non-psychoactive cannabis option for their symptoms.”

Zip Trip started selling CBD products in a limited number of stores in late December 2018 and saw enough movement to stock them in 30 of its sites. “It has by far paid for itself plus more and it will only continue to grow,” Fleck said.

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for more than half the chain’s CBD sales volume. “Liquid ‘shots’ are the next best-sellers out of the eight different CBD options we carry,” Fleck said.

C-store operators should do well with CBD lines in the years to come, Fleck predicted, if they handle them properly. “The product must be easily seen for best-selling results,” he said.

Zip Trip features acrylic cases on the front counter, to clearly show customers it sells CBD. “Any retailer that brings in more than a few options, places them in plain view and keeps the display full will see results. As long as it continues to be legal, we will sell this high-margin item in our stores,” Fleck said.

It’s too early to know where the segment is headed, but it’s being talked about seemingly everywhere, noted Justin Alford, who along with his father and brother owns B-Quik Convenience Stores and Benny’s Car Wash & Oil Change in Baton Rouge, La. “Our local association, the Louisiana Oil Marketers Association, recently had a meeting with lots of discussion,” Alford said. “The local ATF (the federal Bureau of Alcohol, Tobacco, Firearms and Explosives) has not given much direction on it either, but said they will still try and enforce the local laws.”

Still, the Alford family also expects CBD to grow in the years to come. “I do think it could be profitable and will be a category for c-stores,” said Alford. “But right now we are proceedRyan Mathews ing with much caution.”

WELLNESS LEADS CBD products cover a wide range of SKUs across categories and are growing at a remarkable rate, said Ryan Mathews, founder and president of Black Monk Consulting in Royal Oak, Mich. “If the pattern of reforming state laws continues, that growth will only

CBD Oil

accelerate. Look for an initial wave of wellness products, especially CBD lotions, and beverage products Maria Steingoltz — alcoholic and otherwise — to hit the market first,” he said.

Maria Steingoltz, managing director for L.E.K. Consulting in Boston, said based on her firm’s research among consumers, growth is all but inevitable. “With products continuing to enter the mainstream, we expect to see more day-to-day use of consumer products such as edibles, tinctures, vape, lotions and creams with CBD, subject to evolving regulation,” Steingoltz said.

Consultant Nicole Leinbach R e y h l e , Chicago-based Nicole Leinbach Reyhle founder of the Independent Retailer Conference, pointed out that CBD products are increasingly becoming more mainstream and more widely accepted among consumers across all generations. “Wellness and beauty products that incorporate CBD are becoming increasingly popular, with items that range from shampoo to facial skincare to body lotion that helps to ease pain and more,” Reyhle said.

Legislators across America are still grappling with how to approach CBD. “State laws continue to be obstacles, and mass distribution will require significant consumer education to reinforce the message that CBD won’t get you ‘high’ like THC,” said Mathews. “But there is a tsunami of corporate money being spent on promoting these items, and consumer acceptance, according to research by companies like A.T. Kearney, is quite widespread.”

For that reason, Mathews expects the market to continue to expand for the next five to 10 years. CSD June 2019 Convenience Store Decisions 53

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Foodservice

Chicken

C-Stores Heat Up Chicken Programs

Chicken offers c-stores an ideal platform for incorporating the bolder, hotter flavors customers crave.

Isabelle Gustafson, Associate Editor

E

ven as consumers’ tastes evolve and younger generations say, “the spicier, the better,” chicken remains a popular menu item for convenience stores.

In fact, according to the U.S. Department of Agriculture (USDA), in 2018, Americans were projected to have eaten a record 93 pounds of chicken per person.

Its unwavering popularity and serious versatility makes chicken a great platform for other trends, like flavor mash-ups and extra spice — and offers c-stores an easy way to balance innovation and convenience.

FLAVORS AND FORMS Chicago-based market research firm Datassential’s SCORES database tracks limited-time offers (LTOs) and new product launches. The firm asks consumers to rate them on a variety of metrics in order to determine how appealing a product is 54 Convenience Store Decisions June 2019

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and how likely it is to be successful.

“One of the things that I noticed with the high-scoring items is a use of chicken as a platform for a lot of other trends in the industry,” said Jackie Rodriguez, Datassential senior project manager.

She said “chicken can go way beyond the traditional” — and cites the Buffalo Chicken Mac and Cheese Sub from Whitehouse Station, N.J.-based c-store chain QuickChek as an example.

“Buffalo chicken and mac and cheese are two of consumers’ favorite items, but because it’s a c-store item, where handhelds are really important, they put it in a submarine sandwich platform,” said Rodriguez. “And that did really well in terms of uniqueness.”

She said sandwiches are an easy way to incorporate new flavors and forms, but it’s certainly not the only option. Casey’s General Store, for example, also has Buffalo chicken on the menu: Buffalo Chicken Pizza.

Fast Facts: » Sauce is an easy way to add an extra kick to any chicken product. » Chicken makes an ideal platform for numerous food trends. » Boneless chicken is preferred for consumers on the go, according to Datassential.

cstoredecisions.com

5/24/19 9:26 AM

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Foodservice

Chicken

Potter said customers at the most popular sauces,” she said. company’s Johnson City, “But if they want spicy, they get the Tenn., location, also a Buffalo sauce.”

Broaster partner, are And a Datassential study shows “always looking that many customers do. for a good value” “We had people with a barbecue f ro m c h i c k e n sauce or a mustard that can be spicy f o o d s e r v i c e or not,” said Rodriguez. “About onea l o n g w i t h quarter of people said, ‘The spicier, g r a b - a n d - g o the better. Just let me have it.’” convenience.

She attributes the increased popuHer custom- larity of spicy foods and sauces, in part, ers also happen to “the emergence of global cuisines.” to be looking for We’re more exposed to different chicken liver. “We cultures now than ever before — and sell a lot of liver,” we occupy more cultures, too. she said. “Forty With more than 60 million members pounds a day.” in the U.S, according to consulting firm Both she and Carper BridgeWorks, Generation Z is larger mentioned spicy popcorn than millennials and two-thirds the size chicken as one of the most popu- of the baby boomers. lar offers, and Potter said customers And according to a Pew Research Because pizza is so universally who typically purchase spicy food Center report, Gen Z, born between 1997 and 2012, is not only the loved, yet consumers are increasingly are younger, in their 20s or 30s. country’s largest generation, but also adventurous when it comes to topping the most racially and ethnically diverse. variety, this is a great area to integrate SOME LIKE IT HOT This means young consumers are chicken with other trends, too.

In fact, one of the most significant The chain has several specialty piz- changes in consumer preference, par- familiar with a wider variety of cuizas that include chicken, such as a ticularly among young consumers, is sines than generations before. That’s not going to change, so retailers must Chicken, Bacon & Ranch Pizza and an increased taste for spicy food.

Taco Pizza, which can be topped with For example, Atlanta-based adapt instead.

Many c-stores are adapting, adding either chicken or beef.

RaceTrac’s Nashville Hot Chicken But Rodriguez said Caseys’ Spinach, Taquito has been a top seller since not only Mexican foods like taquiArtichoke and Chicken Pizza, an LTO it launched on Feb. 6, according to tos to the menu, but also Thai food, that began in March, was “almost off Tiffany Plemmons, senior category for example, like Pittsburgh-based the charts in terms of consumer appeal.” manager for RaceTrac, which operates GetGo’s Spicy Red Thai Chicken Curry, “It might be because it’s something more than 500 stores in the Southeast. which Rodriguez said rated highly by that they don’t always see at a c-store,” It’s now one of the company’s top consumers for both uniqueness and likelihood of purchase. she said. “Pizza is a great platform roller grill products.

“Not necessarily that all of the food for showcasing chicken, maybe with “We were excited to launch a new ingredients that customers haven’t limited-time-offer product that reso- in, say, Thai cuisine is spicy, but cerseen before.” nated with our consumer as well as hit tainly compared to traditional Italian Rodriguez said Datassential found on a hot new trend — Nashville Hot food, for example, it has more comthat overall, boneless chicken is pre- Chicken,” said Plemmons. “The prod- plex and typically hotter spice levels,” ferred for consumers on the go. uct has a hot, spicy flavor mixed with said Rodriguez. “Spiciness overall is definitely trending.”

Phil Carper, of Phil’s One Stop, a fried chicken with a hint of pickles.”

While some members of Gen Z c-store chain in northern Indiana and But spice doesn’t have to come Ohio, partners with Broaster Co. for from the chicken itself; sauce is an might say, “the spicier, the better,” its chicken program at six of 18 total easy way to add an extra kick to any Rodriguez said it depends on the dish. But no matter an individual’s locations. He said boneless chicken chicken product. options, like the chicken tenders, are Potter said KenJo Markets’ house- preference, she said most young one of the stores’ best-sellers. “It’s a made Buffalo sauce is a customer consumers are more attuned to flavor complexity overall and how different great product,” he said. favorite for that reason.

KenJo Markets operator Helen “Honey mustard or ranch are the spice levels enhance their food. CSD 56 Convenience Store Decisions June 2019

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cstoredecisions.com

5/24/19 9:26 AM

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5/23/19 8:54 AM

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Foodservice

Pizza & Roller Grill

Elevating Pizza and Roller Grill Surpassing customers’ roller grill and pizza expectations can spur serious sales boosts for food-focused retailers.

Marilyn Odesser-Torpey, Associate Editor

A

t convenience stores, customers expect to find hot dogs on the roller grill and pizza in the warmer. But what if those hot dogs were footlongs served on cheddar jalapeño buns, and the pizza was crowned with a signature combination of pepperoni and hot sauce?

While some retailers believe that bringing roller grill and pizza into the spotlight undermines a message of restaurant-quality foodservice, this move can actually have the opposite effect, said Liza Salaria, senior principal consultant for Impact 21 Group, a Lexington, Ky.-based consulting firm specializing in the convenience, retail and refining industries.

In most cases, there is a lot of “white space” around roller grill and pizza, meaning plenty of room exists to add excitement to the categories with innovative product twists, merchandising and promotion, she explained.

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“Retailers can demonstrate to customers how serious they are about foodservice by paying a little extra attention to these two categories,” Salaria said. “Even something as simple as a cold well bar holding fresh condiments such as coleslaw, jalapeños, fresh onions, salsa, pickles and relish can make a statement.”

Millennials and Gen Z in particular are looking for zestier flavors, so giving them the option to choose from a variety of toppings can win their hearts. Another easy way to take hot dogs to the next level is to vary the bun or roll, she said.

“For both roller grill and pizza, retailers can come up with creative flavor profiles and topping combinations that can become uniquely associated with their brand and make their stores destinations for those products,” Salaria said.

“Even for stores where the prominent foodservice offering is made-to-order, having interesting roller grill and/or pizza

Fast Facts: » Roller grill and pizza can emphasize a quality-food message. » Millennials and Gen Z are looking for zestier flavors. » Signature food items can make stores destinations. cstoredecisions.com

5/24/19 6:13 AM

offerings can be trigger points, encouraging food customers to look at the made-to-order menu,” Salaria said.

At Pump N Pantry, a northeastern Pennsylvania-based chain of 15 stores, 13 of which sell pizza, customers come specifically for the Chicken Spiedie pizza, chain’s commitment to keeping every part of its foodsera spin on a local specialty featuring vice on trend, according to Scott Keplinger, vice president grilled, marinated chicken, said Wade of category management. An extensive toppings bar allows Robinson, the company’s food service customers to get creative as well.

LTOs highlight the pizza offering at Kum & Go and have supervisor. One of the stores also had a hit with an “Angry Pepperoni” helped it to grow “very robustly,” Keplinger said. He pointed to a Chicken, Artichoke and Spinach Pizza as a creation that pie with a hot sauce base.

“Customers love anything hot generated a lot of buzz. As a specialty for the Christmas holidays, they liked the Pizza Navidad with seasonal red-andand spicy,” Robinson said. green colors from pepperoni and green chilies.

Keplinger said that on the regular pizza menu, a breakUNIQUE VARIATIONS Another location garnered atten- fast pie with sausage, bacon, ham and hash browns is tion for its pizza topped with mac always a big seller. CSD and cheese and ham. A recent limited-time offer (LTO) was topped with For more on pizza and roller grill, view an expanded version of this pierogi. Sales of eight-inch personal pies, story at cstoredecisions.com/2019/06/10/Elevating-pizza-and-roller-grill introduced last year, are strong.

“We encourage our store employees to use their imaginations and come up with unique and different variations,” Robinson said.

“Pizza is our No. 1-selling foodservice item. It got us on the map 20 years ago for foodservice, making us known not as a gas station that has a pizzeria, but rather, a pizzeria that happens to sell gas.”

To top roller grill items, available in nine of the stores, customers can choose from an assortment including chili and cheese. Pump N Pantry used to have self-serve grills until the company tried taking them off the floor and putting them with • Custom-Made To Each the condiments behind glass for full service.

Customer’s Pizza Size “The manager said we were crazy, but within 21 days, our And Slice Application roller grill sales doubled,” Robinson said. “Now our roller • Made From FDA Approved grill items are ordered on our touchscreen kiosk, and we Composition Material will continue that model in any stores we remodel. I think Improves Efficiencies, that customers view the items as fresher when they are Reduces Food Waste, served from behind the counter.”

Increases Profits While hot dogs are “by far the No. 1 best-seller” on the • Used By Some Of The roller grill, Pump N Pantry also offers other options to coorLargest Convenience Store dinate with time of day. In the morning, for example, the Chains grills feature breakfast sausages, French toast and supreme omelet tornados; later in the day into night, spicy jalapeño dogs, Bahama Mamas and tornados filled with pepperoni and cheese or southwestern chicken are available.

“We sell an insane number of tornados,” Robinson said.

Visit www.portionpadl.com for more information or For its roller grills, Kum & Go, which operates about 400 Contact Greg Getzinger at greg@portionpadl.com stores in 11 states, looks for different items like the no-carb Call 330-608-5928 For Volume Discounting chicken and Nashville Hot roller bites to demonstrate the

Cut Whole Pizzas Into Equal Slices Every Time!

June 2019 Convenience Store Decisions 59

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Technology

Loyalty

Data Segmentation Boosts Loyalty Success Analyzing customer data takes loyalty programs to a new level of personalization.

Brad Perkins, Contributing Editor

D

espite news of the recent Facebook data breach and other highprofile misuses, data is not something to be feared. It is something to be captured and used in a way that benefits both c-stores and the customers they enroll in loyalty programs.

According to the Bond 2019 Loyalty Report, 73% of people are “more likely to recommend brands with good loyalty programs,” while 79% are more likely to do business with those brands and 66% spend more at brands with better loyalty benefits. The 2019 survey also showed that people want choice and are willing to share their data to get it, with 87% of people willing to have their purchasing habits and store visits monitored in order to receive more personalized rewards and relevant content.

That’s why loyalty programs should 60 Convenience Store Decisions June 2019

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Fast Facts: go beyond just taking down names, putting them on a card and sending out a periodic email blast.

“Analyzing customer data is the key to measuring the effectiveness of a loyalty program,” said Perry Kramer, senior vice president and practice lead at retail consulting firm BRP. “In the last couple of years, there has been an increased willingness from consumers to provide their data as part of the enrollment process, as long as they perceive a value or reward for providing the data.”

That reward goes beyond five cents off gas or a free soda.

“It’s all about value and trying to con-

» Data segmentation helps retailers divide their customer base into groups for data analysis and marketing campaigns. » To meet the changing needs of customers, loyalty programs must be adaptable. » The Bond 2019 Loyalty Report found 87% of customers are willing to have their purchasing habits and store visits monitored in order to receive personalized rewards and relevant content.

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Wayne Smith, Male Age 31 Before Joining

6 Visits 4 Fuel visits per month per month

After Joining

10 Visits 5 Fuel visits

per month

per month

Every convenience store has a “Wayne Smith,� someone whose purchase behavior is brimming with potential. Six months ago, Wayne filled his tank and then signed up for the rewards program. Today, he visits the store more frequently and has added an extra fuel visit to his routine.

Individual-level behavior data enables marketers to develop more profitable promotions, bolster sales in targeted categories, and motivate frequent fuel customers to make in-store purchases.

High-fidelity software, 99.99% uptime, transaction speeds measured in milliseconds, and certified integrations with Verifone, Radiant, and Gilbarco make Paytronix the partner of choice for innovative, forward-thinking multiunit chains.

Learn quickly, act instantly, and create revenue from carefully crafted customer relationships.

Contact us today at (617) 649-3300, ext. 5, or visit paytronix.com.

L o ya L t y P r o g r a m S > E m a i L C L u b S > C u S t o m E r i n S i g h t S CSD_Ad_Template.indd 21

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Technology

Loyalty

nect with the customer at a deeper level,” said Darrin Samaha, vice president and brand manager at Yesway, which launched its Yesway Rewards program in 2017 and has seen exponential growth in both membership and offerings.

The program started with in-store rewards, but grew in part because it targeted all kinds of customers.

“Knowing we were operating in rural and even hyper-rural markets, we didn’t want to exclude any of our customers, we wanted to make sure the program was accessible to all,” Samaha said of the decision to offer both a card and an app. “The goal was to introduce the program to as many customers as possible, get them earning and redeeming points quickly, so they saw value in the program, and then over time, incentivize them to come in more frequently through some of our communication platforms.”

Yesway also captured data to determine who visited the store, the pump or both, as well as how often, so it could offer incentives to inspire the customers to take new actions. It introduced new perks, like privatelabel samples, trials and discounts and a “stack and save” program that merged fuel and in-store rewards.

It even offered specific perks, like bottled water, and is looking into items like meat snacks and campaigns with suppliers that would draw in fuelonly customers.

“Customers were very enthusias-

tic about being the first ones to try products and have the opportunity to earn rewards based on buying Yesway products,” Samaha said.

Yesway worked with Paytronix to capture data, deliver email campaigns and review performance metrics. Now the companies are looking into one-toone marketing, mobile wallets, machine learning and artificial intelligence, while also improving the app to make rewards redemption even easier; all while expanding Yesway’s ability to talk with customers.

“The more precise we can be with our messaging, the more relevant we’re going to be to our customers,” Samaha said. “Given our high transaction count, this is very much in our front view and we’re excited about it because it’s going to add more value to our program.”

BUILD AND ADAPT Customer loyalty can be fluid. But positive experiences rule. The 2019 Bond survey showed customers who experience satisfying interactions with a brand have a 9.2-times better opinion of that brand and are more likely to recommend and spend more.

“To be successful and meet the changing needs of the guest, loyalty programs have to be adaptable,” said Steven Root, senior manager of loyalty marketing at Pilot Flying J. “We hope to earn our guests’ loyalty, and personalization is key to that.

Data enables us to effectively deliver the personalized value that we strive to provide our guests,” he said.

“Smart marketers will build customized marketing campaigns by store, region or customer demographic, which enables retailers to spend marketing and margin dollars where they are most effective instead of spreading them across the entire customer base.”

— Perry Kramer, senior vice president and practice lead, BRP. 62 Convenience Store Decisions June 2019

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Pilot Flying J met this need with an improved app that gives drivers personalized experiences based on types of travel, location, preferences and needs.

“Our new app meets the needs of the driver, whoever and wherever they are on their journey,” Root said. “The app continues to be a huge touchpoint for us with all guests, especially professional drivers, as it allows them to maximize their myRewards experience by saving time and money at our Pilot Flying J travel centers.”

Neither Pilot Flying J nor Yesway would be able to expand their offerings without knowing about their customers. And that’s why segmentation is so important.

“Data segmentation enables retailers to divide their customer base into groupings for data analysis and marketing campaigns,” Kramer said. “The most effective grouping of segments will vary across retailer types. If you are a c-store that sells pizzas or fresh food, it will differ from a c-store that has madeto-order breakfast offerings and from another that has a large beer cooler.”

Kramer recommends 10 or fewer data segments, focused on key store areas and purchase history.

“Understand and continually refine the segments to tailor the value proposition to maximize enrollment and active users,” Kramer said. “Smart marketers will build customized marketing campaigns by store, region or customer demographic, which enables retailers to spend marketing and margin dollars where they are most effective instead of spreading them across the entire customer base.” CSD

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Browse, bookmark, share and interact with the most relevant industry content and people in the market.

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5/23/19 9:20 PM

PRODUCTShowcase Half-Glass Refrigerator Doors

Individually Wrapped Waffle Snack St Pierre is expanding its portfolio with a brandnew collection of 10 individually wrapped, European-inspired snacks.

Waffle varieties include: Butter Belgian Waffle, Butter Belgian Waffle with Chocolate Coating and Cinnamon Belgian Waffle, all with a $1.89 suggested retail price (SRP) and 10 products per case, as well as the Caramel Waffle, $1.49 SRP with 12 products per case. The shelf-ready packaging makes it easy to merchandise on deli counters and salad bars, while countertop racks can easily complement your coffee display. Consider placing the new St Pierre full-size rack at the frontof-store to capture your customer’s attention as soon as they walk in. Each product has a 28-day ambient shelf-life and is shipped frozen to ensure the freshest products reach your shelves.

Company: St Pierre

amy.cossey@ stpierregroupe.com

Hoshizaki America Inc. introduces half-glass doors to their one- and twosection refrigerators and freezers. Each 27.75-inch-tall door features energyefficient, multi-pane glass and locks, and are field reversible within minutes.

Interior LED lights on a switch optimize product displays. The half-glass door models join Hoshizaki’s existing lineup of one-, two- and three-section, reachin door options: full-glass, full-solid and half-solid doors.

Company: Hoshizaki America Inc. www.hoshizakiamerica.com

Butterscotch Liquid Creamer Singles Turn any cup of coffee into an anytime snack.

Coffee fits perfectly into the snacking trend, and now you can offer the rich butterscotch flavor that turns any coffee into an easy indulgence any time of day. Inspired by the silky-smooth deliciousness of the classic candy, Coffee-mate Butterscotch singles provide creamy, buttery taste with a hint of vanilla that’s non-dairy, lactose-free, glutenfree and kosher. Available in both four 50-count dispenser boxes for countertop self-service or 180-count foodservice packs for high-traffic operations. Stores ambient for nine months. Visit the website for free samples and additional information.

Company: Coffee-mate www.cmfeelthelove.com/promotions

Frozen, Uncarbonated Beverage Sunny Sky Products LLC partnered with Welch Foods Inc. to launch a new line of frozen, uncarbonated beverages. Made with 3% fruit juice, Welch’s Frozen was developed with Welch’s notable fruit flavors in mind so that consumers can now enjoy their favorite Welch’s flavors in a frozen beverage format. Welch’s Frozen not only bears the popular juice brand name but also offers the same fresh-picked Welch’s flavors, now in a refreshing icy blended beverage. Sunny Sky Products is offering three fruity flavors — Concord Grape, Strawberry Kiwi and White Peach. Welch’s Frozen beverage concentrates are available in a three-gallon bag-in-box and cases containing six half-gallon bottles. Equipment merchandising is also available.

Company: Sunny Sky Products LLC http://sunnyskyproducts.com

www.stpierrebakery.com 64 Convenience Store Decisions June 2019

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PRODUCTShowcase CBD Products

All-Natural Energy Drink X2 All-Natural Energy is available in 12-ounce cans and is designed for everyday healthy living. X2 is low in sugar, has no artificial ingredients and uses only naturally derived caffeine from green tea.

Leveraging a unique formula combining fast- and slow-acting sugars, X2 delivers sustained energy without adverse side effects like jitters or a hard crash. It is noncarbonated and comes in six flavors, including a Sport version with coconut water for added hydration. Backed by over 10 years of research and development, X2 features a unique formulation of critical ingredients that supports the development of Adenosine Triphosphate (ATP), the body’s essential source of real energy.

Company: X2 https://www.x2energy.com

VPR Brands has done it again. The parent company of the Honey Stick, the popular vaping hardware brand for oils, has created its newest brand, Gold Line CBD. A top-selling CBD brand nationwide, Gold Line CBD offers best-selling CBD products — including CBD gummies, oils and bath bombs — and programs for c-stores. Gold Line CBD products are made with the highest-quality CBD with lab reports to back it up, combined with eyecatching packaging and several different display options to increase your CBD sales.

Out-selling their competitors, and bringing you excellent margins, Gold Line is a CBD brand you can trust.

Company:

Gold Line CBD

(954) 504-9086

www.cbdgoldline.com

Business Management System Checkit’s latest cloud technologies helps businesses supervise multiple employees at multiple operations simultaneously. Checkit’s business management software works with a combination of handheld, internet-enabled devices and equipment performance sensors to generate information about an entire restaurant operation and transmit it to the cloud. From that database, managers can monitor all essential activities via a shared dashboard.

That 10,000-foot view allows them to recognize and correct problems immediately, no matter where they are.

Sustainably Sourced Coffee S&D Coffee & Tea announced a new line of sustainably sourced coffees as a part of its Raíz Sustainability sourcing platform. These products are the first 100% sustainably sourced coffees to be produced and branded with both the S&D Coffee & Tea and Raíz branding. Raíz Reserve coffees are exclusively available as seasonal offerings, guaranteeing peak freshness and quality, as each coffee is harvested by farmers during the ideal season for a particular region.

The new varietals include a crisp, medium/light roast with hints of honey from Central America, and a bright, citric and sweet medium roast from South America, which will be introduced in September 2019 and remain available through the end of the year.

Company: S&D Coffee & Tea

(800) 933-2210

www.sdcoffeetea.com

Company: Checkit

(833) 442-4325

www.us.checkit.net cstoredecisions.com

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PRODUCTShowcase Energy-Efficient Roller Grill

Oral Nicotine Pouch On April 1, Swedish Match nationally launched ZYN, an oral nicotine pouch product for adult users that is propelling manufacturer Swedish Match one step closer to realizing its vision of a world without cigarettes.

ZYN is a smoke-free, spitfree, tobacco-free nicotine pouch placed in the upper lip. It’s chemically the same as Nicorette chewing gum and comes in two strengths (three milligram and six milligram) to help nicotine users be mindful about their nicotine intake. Instead of inhaling or chewing, users place ZYN in their upper lip (much like snus, which is why there is no need to spit).

They won’t have to wonder what kind of toxins or heavy metals are entering their lungs. In fact, they won’t have to wonder what’s in the pouch at all.

Company: ZYN us.zyn.com

Creative Serving, a manufacturer of retail countertop foodservice equipment, offers roller grills for hot food selections with patented rollers designed to reduce energy costs. Traditional roller grills require higher wattage and more amps heating elements, which must be turned on more often due to their design.

Heated air can continuously escape from both ends of the hollow rollers used, causing heat variances of as much as 50 degrees across the surface. This can cause products to be over- or undercooked and fall below proper warming or food safety standards. In contrast, roller grills from Creative Serving have sealed ends, which can reduce these variances to less than 20 degrees and distribute heat more evenly. By preventing heated air from escaping, lower wattage heating elements can be used. The result is a more consistent temperature that minimizes food waste and improves food safety, while also reducing electrical costs.

Company: Creative Serving http://creativeserving.com

Limited-Edition Summer Cigarillo Swisher Sweets Summer Twist, a customer summer favorite, is now available as a limited-edition cigarillo, providing a refreshing combination of lemon tartness with sweet mango for the perfect summer taste. Available in a resealable two-count pouch with the “Sealed Fresh” guarantee, Swisher Sweets Summer Twist is ready for shipment to stores nationwide. It is offered in “two for 99 cents,” “save on two” and “two for $1.49” options. Summer Twist is also available in a “two for $1.29” option for select markets.

Company: Swisher Sweets

(800) 874-9720 • https://swisher.com/cigars-cigarillos/?product=ss-lto

All-Natural Beef Jerky AriZona Snacks announced new allnatural, U.S.-made, Crazy Cowboy Beef Steak Jerky, available in classic, peppered, teriyaki, maple bacon and mango habañero varieties.

The right cut of meat makes all the difference when making great-tasting, tender beef jerky. Made with real seasonings and spices you can find in your kitchen, AriZona jerky is free of added flavorings, gluten, MSG, preservatives or nitrates. This all-natural, tender beef jerky is a guilt-free treat.

Company: AriZona Beverage Co. (516) 812-0339 • www.drinkarizona.com 66 Convenience Store Decisions June 2019

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cstoredecisions.com

5/24/19 2:02 PM

PRODUCTShowcase Dutch-Inspired Organic Waffle

Nitro Cold-Brew Coffee

Honey Stinger makes all natural, honey-based energy foods.

Honey Stinger Organic Waffles are the original energy waffles. Inspired by the Dutch Stroopwafel, Honey Stinger waffles are easy to digest and quickly absorb into your system.

Fuel made simple. Honey Stinger Organic Waffles are Certified Organic and Kosher. They come in several varieties, including honey, vanilla-favored, chocolate-flavored, lemon-flavored, gingersnap, caramel-flavored and strawberryflavored. The suggested retail price is $1.29.

Company: Honey Stinger www.honeystinger.com

Ready-to-Drink Cocktail Building on the success of its signature Spicy Bloody Mary Mix, McClure’s released a new Ready-to-Drink Bloody Mary Cocktail. With ease at top of mind, the brand introduces the single-serve, 12-ounce cans with 7.5% alcohol by volume (ABV) into a competitive alcohol category where brothers Bob and Joe McClure noticed a gap that needed filled.

In partnership with Pigeon Hill Brewing Co., each batch is made with simple ingredients and delivers a new way to love the McClure’s Bloody Mary recipe consumers already know and love.

Rise Brewing Co. brews nitro cold-brew coffee kegs and shelf-stable cans. Its flagship, award-winning Original Black coffee, is organic, non-GMO, non-dairy and zero calories. Think a super light, refreshing stout beer meets iced coffee with a frothy head. An infusion of nitrogen gives Rise its distinctive, creamy cascade. Rise also has a line of organic dairy and non-dairy lattes, including the Oat Milk Latte and the Oat Milk Mocha Latte.

Company:

Rise Brewing Co.

https://risebrewingco.com

Company: McClure’s www.mcclures.com

Hazelnut Chocolate Candies The M&M’S Hazelnut Spread Chocolate Candies feature a hazelnut spread center covered in delicious milk chocolate, offering a delectable combination of chocolate and hazelnut flavors in every bite-sized piece. The product is a permanent addition to the M&M’S iconic lineup as the second new, soft-center innovation after M&M’S Caramel, which launched in 2017. M&M’S Hazelnut Spread Chocolate Candies come in an eyecatching teal package in Singles (1.35-ounce), Share Size (2.53-ounce) and Sharing Size Stand Up Pouch (8.3-ounce).

Company: Mars www.mars.com cstoredecisions.com

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June 2019 Convenience Store Decisions 67

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Classifieds /Ad Index ADD Systems 800.922.0972 / www.go.addsys.com/build Blu 888.207.4588 / www.blu.com

Calico Brands 800.544.4837 / www.calicobrands.com CB Distributors 888.824.3256 / www.cbprices.com

15 35 51 5, 7

Cheyenne International 39 866.254.6975 / www.cheyennecigars15.com Click It www.clickitinc.com

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E-Alternative Solutions 877.373.0069 / www.LeapVapor.com

33

(Select Regions ONLY)

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Florida Lottery Commission

www.flalottery.com/LotteryOffices Gulfcoast 727.449.2296 / www.gulfcoast.com

Hunt Brothers 800.453.3675 www.huntbrotherspizza.com/CSD JUUL www.juul.com

3 9 27

Kretek 800.532.4427 / www.djarumcigar.com

45

Krispy Krunchy 17, 55 800.290.6097 / www.krispykrunchy.com Liggett Vector Brands 877.415.4100

41

MasonWays 800.837.2881 / www.masonways.com National Tobacco www.vaperiptide.com

69 29

National Retail Solutions 833.289.2767 / www.nrsplus.com North American Bancard 866.481.4604 / www.nynab.com

Paytronix 617.649.3300 x5 / www.paytronix.com Portion Padl 330.608.5928 / www.portionpadl.com Premier Manufacturing, Inc. 800.272.8656 / www.manitou.us.com Quaker Foods www.quakeroats.com

69 68 61

Republic Tobacco 800.288.8888

19

Skupos www.skupos.com/engage

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Smokey Mountain www.smokeymountainsales.com

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Swedish Match 800.367.3677 www.zyn.com www.smna.com

11 43

Swisher 800.874.9720 / www.swisher.com

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U.S. Smokeless Tobacco

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Reliva 866.223.4367 / www.relivacbd.com

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June 2019 Convenience Store Decisions 69

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INDUSTRY

Perspective

How CBD is

Changing Tobacco Sets Customer interest in CBD products is high, but the industry waits for FDA clarification on marketing rules.

Steve Sandman, Contributing Editor

C

BD is everywhere, or so it would seem to both the casual observer and industry insiders. With the passage of the 2018 U.S. Farm Bill that included the legalization of industrial hemp, CBD products became legal to source from a federal standpoint and are legal to sell in the U.S. Manufacturers, distributors and retailers have found themselves rushing to take advantage of this new category in hope of boosting profits, increasing market basket size and luring new consumers into their stores.

Countless articles stream across desktops as Walgreens, CVS and a new chain of over 100 mall stores anticipate this new goldmine for retailers across a variety of trade channels. The change in the law has also created new excitement as this product line reminds many of the energy drink craze a decade ago. So what’s the best way to capitalize on CBD? My advice is HURRY UP and WAIT! The Farm Bill, signed into law in 2018, segregated industrial hemp from marijuana, which had both been included in one description and classified as a Schedule 1 drug, making it as illegal as selling or possessing heroin.

Way back when, hemp was commonly used for making ropes, clothing and variety of other uses.

Modern technology now allows a grower to produce plants with only trace amounts of THC, the chemical in marijuana that produces the euphoric effects of “getting high.” Furthermore, the CBD elements can be separated from the plant in order for consumers to get the benefits of it such as pain relief, better sleep and relaxation.

Unfortunately, CBD is not legal in all states, and even in states where CBD is legal, a wide variety of regulatory laws have been passed from what products CBD can be included in to specific state labeling requirements and certification procedures; moreover, some states currently allow CBD to be sold in only certain retail establishments.

Retailers must check with each jurisdiction in which they operate to determine if they are allowed to sell CBD and with what requirements the products must comply.

70 Convenience Store Decisions June 2019

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Steve Sandman has worked in the tobacco industry for more than 30 years, most recently as president of Republic Tobacco. His extensive experience includes product management. He can be reached at (812) 569-1388.

OPPORTUNITIES ABOUND The opportunity that CBD represents has resulted in hundreds of suppliers popping up overnight. Unfortunately, most of them have no history with the c-store trade, and references are scarce or nonexistent. Every supplier says they have the finest plant source for CBD, the cleanest extraction process, the purest ingredients; however, they all can’t be perfect.

I have also found a number of suppliers making false or misleading statements regarding the legality of sale in various states, or they have been unfamiliar with labeling requirements. In addition to checking with local jurisdictions, retailers must proceed with caution in vetting their suppliers in order to prevent the disappearance of suppliers in case a product doesn’t sell or laws change, similar to what occurred in the e-liquid category in the past.

A good supplier should be able to provide a written guarantee of sales, along with naming the retailer as an additional insured entity in case of any future litigation with their product. CBD is available in multiple formats, sizes and strengths. It’s rather easy to get to a few hundred SKUs in a matter of moments if you’re not careful.

The category includes edibles such as gummies, tincture liquids, pre-filled tanks with liquid, creams, pills, cigarettes, loose leaf hemp, coffee, tea — who knows what else is out there. Normally, it would be easy to design an assortment on retail pricing tolerances you’ve seen in your stores, but many retailers have been surprised at the sales dollars these products can generate, with some items selling above $100 based on size and strength.

The best, recommended route is to establish a space you’re comfortable with and fill it up with a wide range of price points and sizes. Since you’ve taken my advice and chosen a supplier or two that has given you a guarantee on their products, you should be able to refine your shelf space and return the slower sellers once some patterns have been established. Read more online at cstoredecisions. com/2019/06/07/How-CBD-is-Changing-Tobacco-Sets

cstoredecisions.com

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6/5/19 11:26 AM

LEAVE THE REST BEHIND. Welcome Leaf to the Swisher Sweets family. Swisher Sweets Leaf cigars are perfectly imperfect, embracing every flaw in pursuit of the best cigar. Three unique blends: Original, Honey, and Sweet Aromatic deliver a bold, aromatic smoking experience that is sure to satisfy. Stock your shelf today and watch your sales and profits soar.

800.874.9720

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