CStore Decisions March 2020 by WTWH Media LLC

CStoreDecisions

Solutions for Convenience Retailers

The 2020

Category Management

Review

CStore Decisions outlines extensive insights on top trends and critical headwinds impacting today’s core c-store categories.

INSIDE Bakery Offers Opportunity

Cigarettes Face New Battles

CBD & Hemp Market Cutting Traditional Retail’s Way

78 March 2020

•

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CONTENTS march 2020

•

Number 3

•

Volume 31

CStoreDecisions ®

EDITOR’S MEMO

Impact Leadership: Putting Employees First

FRONT END

10 The Chestnut Market Brand Rises in New York 16 Quick Bites 18 Executive Corner: Casey’s Fresh CEO Bullish on C-Store Industry 22 CM Leadership Awards: Fountain ‘Serves Up More’ at Gate Petroleum 24 CM Leadership Awards: Kempton Keeps Pace With Evolving C-Store Landscape

2020 Category Management Review FOODSERVICE 30 Chicken 32 Pizza 34 Sandwiches 36 Roller Grill 38 Hispanic Foods 40 Bakery 42 Hot Dispensed/Coffee BEVERAGES 44 Carbonated Soft Drinks 46 Cold/Frozen Dispensed 47 Juices & Teas 48 Bottled Water & Sports Drinks 50 Beer, Wine & Adult Beverages 52 Energy Drinks 53 Energy Shots SNACKS

54 Meat Snacks 56 Salty Snacks 57 Sweet Snacks 58 Nuts & Seeds 59 HEALTH & BEAUTY AIDS 60 ICE CREAM & DAIRY 4

CSTORE DECISIONS •

CONFECTIONS 62 Chocolate 64 Non-Chocolate, Gum & Mints TOBACCO 66 Cigarettes 68 Roll-Your-Own Tobacco 70 Smokeless 72 Cigars 74 E-Cigarettes / Vaping 76 Tobacco Accessories

78 CBD TECHNOLOGY 82 Loyalty 84 Prepaid Cards 85 Point-of-Sale Systems 86 Security & Cash Management 88 Electronic Payments OPERATIONS 90 Car Wash 92 Fuel & Alternative Fuels 94 Lighting 95 ATMs

March 2020

28 COVER STORY 28 2020 Category Management Review

CStore Decisions outlines extensive insights on top trends and critical headwinds impacting today’s core c-store categories.

BACK END 96 Product Showcase 101 Ad Index 102 Industry Perspective: What’s Ahead for CBD Sales? cstoredecisions.com

the CSD Group www.cstoredecisions.com

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CStore Decisions

Convenience Store Decisions • EDITORIAL

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Lisa Dell Alba, President and CEO Square One Markets • Bethlehem, Pa. Raymond Huff, President HJB Convenience Corp. • Lakewood, Colo. Bill Kent, President and CEO The Kent Cos. Inc. • Midland, Texas Patrick Lewis, Managing Partner Oasis Stop ‘N Go • Twin Falls, Idaho

Bill Weigel, CEO Weigel’s Inc. • Knoxville, Tenn.

NATIONAL ADVISORY GROUP (NAG) BOARD Doug Galli, Board Chairman Reid Stores Inc./Crosby’s • Brockport, N.Y. Mary Banmiller, Director of Retail Operations Warrenton Oil Inc. • Truesdale, Mo. Greg Ehrlich, Chief Operating Ofﬁcer Beck Suppliers Inc. • Fremont, Ohio

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

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Derek Gaskins, Senior VP, Merchandising/Procurement Yesway • Des Moines, Iowa Joe Hamza, Chief Operating Ofﬁcer Nouria Energy Corp • Worcester, Mass. Brent Mouton, President and CEO Hit-N-Run Food Stores • Lafayette, La. Peter Tamburro, General Manager Clifford Fuel Co. • Marcy, N.Y. Vernon Young, President and CEO Young Oil Co. • Piedmont, Ala.

YOUNG EXECUTIVES ORGANIZATION (YEO) BOARD Jeremie Myhren, Board Chairman Road Ranger • Rockford, Ill.

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Garet Bishop, Chief Financial Ofﬁcer BFS Cos. • Morgantown, W.Va. 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 Brand Manager Chestnut Petroleum Inc. • New Paltz, N.Y.

CStore Decisions (ISSN 1054-7797) is published monthly by WTWH Media, LLC., 1111 Superior Ave., Suite 2600, Cleveland, OH 44114, for petroleum company and convenience store operators, owners, managers. Qualified U.S. subscribers receive CStore Decisions at no charge. For others, the cost is $80 a year in the U.S. and Possessions, $95 in Canada, and $150 in all other countries. Single copies are available at $9 each in the U.S. and Possessions, $10 each in Canada and $13 in all other countries. Periodicals postage paid at Cleveland, OH, and additional mailing offices. POSTMASTER: Send address changes to CStore Decisions, 1111 Superior Avenue, 26th Floor, Cleveland, OH 44114. GST #R126431964, Canadian Publication Sales Agreement No: #40026880. CSTORE DECISIONS does not endorse any products, programs or services of advertisers or editorial contributors. Copyright 2020 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.

Lindsay Lyden, Vice President, Development True North Energy • Brecksville, Ohio Stacey Davis, Manager of Marketing Clifford Fuel Co. Inc. • Marcy, N.Y.

CSTORE DECISIONS •

March 2020

cstoredecisions.com

Editor’s Memo

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

Impact Leadership: Putting Employees First Some jobs by their very nature seem more meaningful than others. But really, all jobs are meaningful. All companies serve their customers, but in the convenience store industry, leaders must ﬁrst serve their employees, who are the ones in position to make a real difference on your bottom line. Great leaders create an environment where employees feel valued, and this is what connects them to purpose. That was the key message from author Quint Studer in his new book, “The Busy Leader’s Handbook.” Yet, many companies tend to promote work environments where an employee is more likely to hear about their work when there is a problem. It is assumed that the impact of work is obvious, and because of that, leaders are not taking time to emphasize to each worker the why of their job and the important contribution it makes. These and many other leadership issues will be discussed in May at the seventh annual Young Executives Organization (YEO) Conference in Nashville. As the convenience store and petroleum industry continues to evolve, training the leaders of tomorrow is more important than ever. That’s the driving force behind YEO. This is not an easy industry for young professionals. In addition to learning the business, they are faced with other daunting challenges such as learning to negotiate with vendors, manage employees who can be much older than they are and, perhaps most importantly, make connections with experienced professionals who can help them navigate the rocky terrain. This is where YEO is helping c-store chains of all sizes. The association provides young executives a platform to demonstrate their leadership abilities and vision for the future. NUMBERS DON’T LIE

According to Studer, 53% of workers wish they had more insight into the effect their contributions have on their company’s success. Further, there’s a disconnect illustrating that, while leaders may think they’re doing a good job of helping employees understand their company’s purpose, they really aren’t. A 2019 Deloitte survey found: • 47% of executives strongly agree that they can identify with their company’s purpose, compared to just 30% of employees. 8

CSTORE DECISIONS •

March 2020

• 44% of executives say leaders set an example of living that company’s purpose. Only 25% of employees agree. • 38% of leaders say their organization’s purpose is clearly communicated, compared to 31% of employees. Numbers like these make it clear: It is the job of the leader to take time on a regular basis to help each employee understand the importance of their role and the impact it has on the organization. While the contribution made by the worker may seem obvious, the leader needs to help them connect the dots, Studer said. To accomplish this, he provided tips such as: • Explain to each employee in the company how what they do impacts customers and co-workers. • Connect with customers and share that you like to recognize your team members. Ask customers directly which team members they would like you to recognize and why. • Ask recognized employees who is helping them behind the scenes. Then, share that message with the team. • Share meaningful stories every chance you get to show everyone you are listening and appreciate their work. These are simple tweaks, but they go a long way in making employees feel valued. For young leaders, these are tips they might not be getting themselves in the ofﬁce. That’s why networking with other young executives is so important. There is nothing quite like going to work every day at a company ﬁlled with people who are fueled by a true passion for what they do. It makes every day a learning experience, an adventure and a path for personal and professional growth. To learn more or register for the 2020 YEO Conference, visit YEOconference.com.

k c o t s f o L n h o J

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CONTACT YOUR SWEDISH MATCH REPRESENTATIVE OR CALL 800-367-3677 FOR ADDITIONAL DETAILS

FRONT END Profile

The Chestnut Market Brand

Rises in New York

CPD Energy Corp. unveils its new-to-industry c-store brand in Elmsford, N.Y. John Lofstock • Editor

After years of planning and market testing, Chestnut Petroleum Distributors Inc. (CPD) has begun launching its new Chestnut Market brand to convenience stores in New York. The new brand, which features warm and inviting earth tones and modern graphics, will roll out to dozens of stores over the next two years, said Corporate Brand Manager Sharif Jamal. “Our goal with the new Chestnut Market design is to create a destination for customers that they can trust,” said Jamal, who also serves on the board of the National Advisory Group’s Young Executives Organization (YEO). “As a company, we have been around for nearly 40 years, but we have operated under multiple retail brands,” Jamal said. “We recognized how the industry has changed over the years 10

CSTORE DECISIONS •

March 2020

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FRONT END Profile

“

We recognized how the industry has changed over the years and how important a consistent brand is to customers, so this was the right time to introduce a retail concept that connects with consumers and focuses on their daily needs.

“

— Sharif Jamal, corporate brand manager, Chestnut Petroleum Distributors Inc.

and how important a consistent brand is to customers, so this was the right time to introduce a retail concept that connects with consumers and focuses on their daily needs.” The Chestnut Market brand will feature a host of amenities for cus-

tomers, including a Dunkin’, locally made and freshly prepared foodservice items inside the store, and ExxonMobil’s Synergy brand in the forecourt. Both the Dunkin’ brand and ExxonMobil fuels are strong in the New York market, according to the Chestnut team.

LONG RETAIL HISTORY

CPD has a long history of meeting the daily food and fuel shopping needs of its guests. The company is a family-owned business that began with one station in 1981 located in New Paltz, N.Y., and has grown to become a leading petroleum

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Vending | Micro Markets | Pantry | Office Coffee Services Foodservice | Unattended Retail

FEATURING KEYNOTE SPEAKER

Charles Esten

CATEGORY

MANAGEMENT REVIEW CStore Decisions outlines extensive insights on top trends and critical headwinds impacting today’s core c-store categories. A CStore Decisions Staff Report

In 2020, convenience stores are enticing customers with increased category innovation, from new beverage varieties to fresh food to mobile payment options. In the year ahead, c-stores are also set to face ongoing challenges, including increasing tobacco regulations, technological disruption and growing competition from other channels on ‘convenience.’ The U.S. convenience channel today is comprised of more than 155,000 convenience stores. As competing channels look to encroach on the convenience landscape, c-store operators are expanding on the convenience concept by adding made-to-order foodservice programs that feature healthy food options, as well as delivery and orderahead/pick-up in-store options. From food kiosks to mobile loyalty programs and electronic payments to electric vehicle charging stations, c-stores are investing in cutting-edge technology to best the competition. As Gen Z inﬁltrates the marketplace, c-stores are expanding and ﬁne-tuning their product assortments to meet the evolving needs of today’s consumer. Efforts are paying off. Dollar sales at total U.S. c-stores were up 3.3% for the 52 weeks ending cstoredecisions.com

Dec. 29. 2019, compared to 2% for total multi-outlet (grocery, drug, mass market, military, and select club and dollar retailers), according to Chicago-based market research ﬁrm Information Resources Inc. (IRI). IRI reported that 98% of the U.S. population shops in convenience stores each month, generating more than $200 billion in annual sales. TODAY’S CONSUMER

Customer confidence is currently holding steady — up 1% year over year — with 57% of customers noting they feel positive about their financial well-being, and 73% expecting their household’s economic health would improve over the next six months, according IRI’s “Q4 2019 Consumer Connect Survey.” What’s more, customer demand for convenience and value is growing more influential, IRI found in its recent report, “Channel Trends in CPG Today.” Value retailers, including dollar stores and e-commerce sites, are seeing upticks in customer penetration. When selecting where to shop, factors such as in-store experiential concepts, price and easy navigation services are influencing customer decisions — factors savvy c-store operators are incorporating as they innovate for tomorrow. On the pages that follow, CStore Decisions outlines 38 c-store categories, including one of the newest — cannabidiol (CBD) — sharing the mustknow trends impacting each segment. March 2020 •

CSTORE DECISIONS

Foodservice | Chicken

CUSTOMERS CHOOSE CHICKEN Chicken is a winning category for convenience stores because it gives ample opportunity to emphasize creativity and daypart expansion100 with convenient and affordable meals and snacks. 80 “The United States Department of Agriculture (USDA)’s forecast for chicken consumption is 98.9 pounds (per capita), which is 2.9 pounds or 3% ahead of the 96 60 pounds in 2019,” said Tom Super, senior vice president of communications for the National Chicken Council (NCC). 40 “To achieve the forecast of growth in chicken consumption, companies and retailers will have to continue to do what brought them to the dance — that is, good, consistent 20 taste/flavor/wholesomeness, competitive value and convenience with cooked portions leading the way 0 forward and upward.” In February 2019, Kwik Trip and Kwik Star, with 700 locations in Minnesota, Wisconsin and Iowa, introduced a made-fresh-in-store chicken program to its Kitchen Cravings brand in half of its stores, and it’s rapidly becoming an integral part of the company’s foodservice program, said Paul Servais, retail food service director, Kwik Trip. “During lunch, we sell a lot of two-piece boxes and four-piece tenders from our hot display cases,” Servais said. “Eight-piece boxes do well in the afternoon, and easy to grab and go two- and three-piece tenders are increasingly popular as snacks.” Any leftover chicken is sold from the stores’ cold cases. But Servais said there has been little to no waste.

CSTORE DECISIONS •

March 2020

poultRy type consumption (October 2019)

Which of the following types of poultry have you eaten in the past six months? (Please select all that apply.) 91%

63%

Chicken

Turkey

Source: Lightspeed/Mintel

10%

Duck

Cornish game hen

Goose

Other None of poultry the above

(eg. quail, pheasant)

For customers looking for a non-fried option, and to support the effort to expand the stores’ takehome dinner sales, Kwik Trip is launching a roasted chicken program, Servais said. VERSATILE & AFFORDABLE

Chicken is a versatile and affordable source of protein, according to research firm Mintel’s December 2019 report on poultry. In one Mintel survey, almost half of consumers said that breast meat in particular is the healthiest part of the chicken and the best source of protein. But chicken thighs came out on top with consumers when it comes to being flavorful, followed by drumsticks and breasts. Consumers who reported eating dark meat cuts were more interested in flavor innovation, particularly Korean and Latin American flavor profiles, than those who reported eating white meat cuts or whole poultry. The report suggested retailers develop new recipes, including ones that are built around dark meat and feature bolder, international flavors to create excitement in the category.

cstoredecisions.com

Foodservice | Pizza

FROM MINI TO MAKE-YOUR-OWN,

PIZZA ROLLS WITH THE TRENDS With the variety of crusts and toppings readily available, there’s no “same old, same old” when it comes to pizza. While familiar cheese and pepperoni remain the favorites, creations such as chicken bacon ranch, mac and cheese, and breakfast pizzas are growing rapidly in popularity, noted Mark DiDomenico, director, customer solutions for Datassential research company. At 29 of the 35 Cubby’s convenience stores in Iowa, Nebraska and South Dakota, either the company’s own brand or Godfather’s Pizza is available. In most of its markets, pepperoni is still king, except in Nebraska, where beef is the most requested topping. Cubby’s customers also go for specialty pies such as chicken bacon ranch, bacon cheeseburger, buffalo chicken and taco as well as a “create your own” option.

Top 10 Pizza Varieties

The following 10 pizza varieties are the ones that most commonly appear on menus. Menu Penetration

4-Year Trend

Cheese Pizza

47.50%

-0.10%

Veggie Pizza

43.60%

-3.00%

Margherita Pizza

39.30%

15.30%

BBQ Chicken Pizza

36.80%

-3.80%

Meat Lover Pizza

31.50%

11.50%

Meatball Pizza

30.30%

13.50%

Hawaiian Pizza

29.50%

0.40%

Pepperoni Pizza

24.80%

6.90%

Buffalo Chicken Pizza

24.70%

9.90%

White Pizza

22.80%

-1.20%

Keyword

Source: Datassential’s Menutrends 2019

CSTORE DECISIONS •

March 2020

ADAPTING TO TRENDS

Breakfast pizza is also a very big seller, noted De Lone Wilson, president of Cubby’s. The stores sell a lot of Godfather’s minis, its own Cubby’s-branded slices and made-to-order large pies. “The latest trend in pizza is having customers go down a Chipotle-esque line of ingredients and build their own pie, which is quickly cooked in a wood-fired or extremely hot oven,” DiDomenico reported. Lunch is still the biggest daypart for pizza at Cubby’s, but snack occasions are accounting for an increasing number of sales, Wilson said. The company switched from minis to slices for individual consumption of their own branded pizza “because we’ve found that people are more likely to grab a slice than a full mini for a 3 p.m. snack.” Cubby’s has introduced online ordering with Godfather’s Pizza. “Online ordering has increased our sales by 10% and increased our average order size,” Wilson reported. Some of the locations also offer home delivery to customers who order online, by calling the stores or through an Uber Eats app on their phones. SIGNATURE INNOVATION

At Yesway and Allsup’s convenience stores (Yesway acquired Allsup’s in November 2019 and now operates 415 stores), pizza is a core offering. At Allsup’s, a new signature innovation, a deep-fried pepperoni slice, quickly became a top 10 item within the stores’ hot food program and “has carved out a unique position in the market,” said Derek Gaskins, senior vice president of merchandising and procurement. While the deep-fried pepperoni slice is Allsup’s sole item in the category, Yesway offers an array of pies, both made-toorder and grab-and-go, including cheese, pepperoni, sausage, breakfast and a frozen pie for customers to “take and bake” at home. Lunch is the key daypart for pizza. Gaskins noted that later evening snacking sales are growing.

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Foodservice | Sandwiches

SANDWICHES GET HEALTHY In today’s eat-on-the-go culture, sandwiches are leading the charge to satisfying customer demands, especially those that are ready to grab and go or order in advance via phone or other devices, said Eric Richard, education coordinator for the International Dairy Deli Bakery Association (IDDBA). Convenience stores, he noted, go hand in hand with sandwiches to meet those demands. Richard reported that when it comes to ingredients and products found within sandwiches, consumers are placing a higher priority on health and wellness. That can mean anything from items free from GMOs (genetically modified organisms) to all-natural ingredients to chicken raised without antibiotics. Freshness is another key attribute, making locally sourced meat, cheeses and breads (especially made-instore varieties) particularly appealing, he pointed out. “In consumers’ minds, locally sourced equals fresh and that resonates with consumers, especially younger ones,” Richard explained. Inside the sandwich, plant-based proteins are securing their place on menus. “Non-animal proteins used to mean a veggie sandwich, but now we’re seeing plant-based burgers, chicken, fish and deli products,” he said. “We’re getting to the point where sandwich programs will have to include plantbased protein options.” Overall, Richard said, today’s consumers are much more adventurous than they were years ago, with millennials and Gen Z most diverse in their exposure to a wide variety of ingredients and flavor profiles. By posting photos and descriptions of their favorites on social media, they also create buzz around sandwiches and the retailers who sell them. 34

CSTORE DECISIONS •

March 2020

TRIED-AND-TRUE FAVORITES

But the latest trends don’t necessarily drive sandwich sales in all markets. Sometimes familiar turkey or ham wedges are what consumers want and expect from their local convenience stores. “We’ve tried a lot of different types of sandwiches, from made-to-order to trendy varieties like cranberry chicken salad and jalapeño bagels, but when we looked at the numbers, we found that our customers keep coming back for their traditional go-tos,” said Jon Fleck, merchandising manager for Cenex Zip Trip, the c-store brand of CHS Inc. For its 36 stores in Montana, North Dakota, South Dakota, Minnesota and Wyoming, Zip Trip sells a variety of fresh and frozen grab-and-go sandwiches provided by its supplier, Core-Mark. The frozen sandwiches sell best by a large margin, Fleck said. “There’s not a lot of difference in the retail prices of the fresh and frozen sandwiches,” he said, “so I think it is just the familiarity of the products that keep customers coming back for the ones they like best.”

Snapshot of Sandwich Sales

Cold sandwiches sales were up almost 4% at traditional grocery stores compared to three years ago, while hot sandwiches saw a dip for the period ending June 16, 2019. Subcategory

1-Year % Change

3-Year % Change

Cold

1.5%

3.9%

Hot

-1.1%

-0.6%

Not specified

1.7%

-29.5%

Source: IRI Unify in the Total Store View + Perimeter syndicated hierarchy and data model, 52 weeks ending June 16, 2019; as reported in IDDBA’s “What’s in Store 2020” report. This is projected census-level sales of traditional grocery stores (with sales of $2 million or greater) including Walmart, Target and Sam’s Club.

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Foodservice | Roller Grill

NEW TASTE EXPERIENCES

ATTRACT ROLLER GRILL CUSTOMERS 2019 sales data collected by information and data firm Nielsen showed 871.8 million pounds of hot dogs were sold at U.S. retail stores, representing over $2.3 billion in sales. Nearly 1.1 billion pounds of dinner sausages accounted for sales exceeding $3.9 billion, and breakfast sausages, more than 316.7 million pounds with sales of $1.21 billion. The 4% year-over-year sales surge in dinner sausages can be at least partly attributed to consumers’ interest in going beyond the traditional Italian and bratwurst to varieties from other cultures such as andouille (smoked sausage made using pork) and chorizo, reported Eric Mittenthal, president of the National Hot Dog and Sausage Council. As for hot dogs, consumers are looking for “simpler labels and natural ingredients,” he said. ROLLER GRILL APPEAL

Hoping to upsell customers to higher ring sandwich/deli items, B-Quik, the convenience store division of Benny’s Car Wash with three locations in Louisiana, removed its large roller grills and re-

Top Cities for Hot Dog Sales

Hot dog sales are up almost 4% year over year in Chicago grocery, yet New York City sells the most. Dollar Sales

1-Year % Change

Total U.S. xAOC

$2.33 B

0.90%

Total U.S Food

$1.5 B

0.30%

New York Food

$92.2 M

-1.10%

Los Angeles Food

$70.5 M

-2.00%

Boston Food

$57.8 M

1.70%

Philadelphia Food

$54.4 M

0.00%

Chicago Food

$41.8 M

3.80%

Cities (total outlets combined)

(grocery stores)

Source: Nielsen all-outlet data covering grocery stores and Walmart/Target for the 52 weeks ending Dec. 31, 2019, published by the National Hot Dog and Sausage Council 2019.

CSTORE DECISIONS •

March 2020

placed them with hot dog rotisseries, said David Schumaker, general manager, B-Quik. The result was a slight uplift in hot dog sales, but an overall decrease in foodservice sales. “People think synonymously of a roller grill in convenience stores,” Schumaker explained. Several weeks ago, B-Quik stores installed two 24-inch roller grills, one for hot dogs and sausages all day and the other for Tornados and other breakfast and lunch items, a bun warmer and plenty of space for a staging area in between where customers can dress up their dogs and other items with condiments. The breakfast/lunch grill is set up at 5 a.m., then changed over for lunch at 10 a.m. or 10:30 a.m. The grills hold up to 12 items. B-Quik offers three to six varieties of items on each grill at a time. “We think we may have offered too much product when we had the larger grills and too little when we just had the hot dog rotisseries, so we are hoping that this time we have hit on the right amount,” Schumaker said. Breakfast is the strongest daypart for roller grill sales at B-Quik. To encourage sales of multiples, the stores price all the roller grill items the same, making mixing and matching easier and more appealing. “We’re merchandising them that way with the goal of getting at least a $3 ring,” Schumaker said. Although customers do enjoy seeing new items on the roller grill, “probably 80% have their favorites, and we wouldn’t want to disappoint them by not having them available,” he noted. A new item, Schumaker said, might spark them to get an auxiliary item to go with their favorite.

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Foodservice | Hispanic Foods

INCORPORATING HISPANIC, LATINX FOODS

Market Size of Hispanic Foods, Beverages in U.S. 2015-2020, Based on Sales

The demand for international foods, including Hispanic or Latinx*, is rising, thanks in part to the increasing diversity of the U.S. population.

* Latinx is the gender-neutral term for those from or descendants of Latin America. Hispanic refers to native speakers of Spanish or those with Spanish-speaking ancestry.

CSTORE DECISIONS •

March 2020

21 20 Market size in billion U.S. dollars

The Latinx community represents nearly one-fifth of the U.S. population, according to information and data analytics firm Nielsen, and the U.S. Census Bureau projects it to double to 109 million over the next 40 years. Globalization means young consumers, regardless of individual ethnicity or race, are more exposed than ever to different foods and cultures. “These younger consumers are more experimental than older generations, especially when it comes to food selection,” said Julie Heseman, principal, Foodservice IP, a research-based management consulting firm that specializes in foodservice. Young customers will come to expect more international options from the c-store and beyond. Rockford, Ill.-based Road Ranger, which operates 39 locations in the midwest and Texas, set out to create a new, Mexican foodservice option about five years ago: Tejas Taco Co. The brand features fresh, made-to-order tacos and other popular Mexican fare, available at all dayparts. “We’ve had really good reception — the locals like it as well as the drivers,” said Ryan Arnold, vice president of marketing for Road Ranger. “It’s a program that, because of its success, we’re going to continue to grow.”

The size of the Hispanic foods and beverages market in the U.S. is predicted to hit 21 billion dollars in 2020.

17.5

15 10 5 0

2015

2020

Source: Statista, 2020, market size in billion U.S. dollars

TRENDS TO WATCH

Heseman predicts that, as tacos and burritos become increasingly mainstream, the next Mexican food to gain traction among American consumers will be the tamale, due to its portability and convenience. But, for c-stores new to Mexican foodservice, she said, it’s best to start with what makes the most sense operationally. “If they have a roller grill, taquitos would be a great addition. If they make hot sandwiches to order, then tacos or burritos would be an easier new menu item to add without having to change the existing equipment on-site,” she said. Kara Nielsen, food trend expert and principal of Kara Nielsen Food Trends, pointed to another key trend: the use of more ingredients that are indigenous to Latin America, such as corn, to create an offer that both resonates with people of the culture but still has widespread appeal. For example, pupusas — a thick flatbread from El Salvador made with cornmeal or rice flour — could easily be stuffed with ‘American’ classics, she said, like hamburger meat or pizza, rather than something more traditional.

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Foodservice | Bakery

BAKERY OFFERS OPPORTUNITY The c-store bakery category is evolving, thanks in part to changing perceptions about bread and baked goods. According to the American Bakers Association (ABA), 78% of Gen Z and millennial consumers include carbs in their regular diet, and 63% have purchased a sweet baked good in the past week. Yet, 53% of Gen Z consumers and 48% of millennials buy or eat fewer baked goods than they did one year ago. While sales of bread and bakery have been slow Venezuela that’s made of ground maize dough with various and steady, there’s opportunity for c-stores to meet fillings — into the mix, which have been met with positive the needs of today’s consumer, said Eric Richard, response so far, Klyczek said. education coordinator, International Dairy Deli According to IDDBA’s Richard, the growth of breakfast will Bakery Association (IDDBA). Among them, illustrate continue to impact c-store bakery. “We’ve seen tremendous freshness and simplicity of bakery items. And, growth in breakfast over the past few years,” he said. “And wherever possible, call out clean labeling attributes, we think that we’ll continue to see that growth.” such as natural, organic, gluten-free or multi-grain. Klyczek said he expects Tom Thumb’s overall bakery sales “Consumers are reading labels more frequently to increase in 2020. The chain is putting more emphasis on than they have in the past,” said Richard, “so it’s its prepared foods program, including bakery, updating important that these attributes, the ingredients in its marketing and working to provide a higher level of the product, are cleanly visible on the package.” consistency to the offer. There’s an increased interest in local products as well. Even if c-stores don’t have the resources to bake their products on-site every day, Richard Production claims that matter when buying bakery items said, they may be able to source them Young Older from a local supplier. All Gen X Boomers

Generational Baked Good Preferences

SAVORY PASTRIES

Also gaining momentum in the bakery category are savory pastries. At Miami-based Tom Thumb Food Stores, savory pastries have been a mainstay for years. Offers include empanadas, meat patties and cheese tequeños. While it may not be a traditional bakery offering, Chief Strategy Officer Richard Klyczek said it’s reflective of the region’s demographics. “Doughnuts and muffins, believe it or not, don’t index that well here in south Florida,” he said. The chain recently introduced arepas — a popular food from Colombia and 40

CSTORE DECISIONS •

March 2020

Millennials

Fresh

70%

65%

69%

70%

78%

Baked Today

56%

50%

58%

61%

Made In-Store

40%

43%

34%

40%

46%

All Natural

33%

38%

34%

32%

31%

Hot/Warm

29%

34%

29%

31%

21%

Artisan

29%

30%

27%

34%

Made by On-Site Professional Bakers

22%

28%

21%

20%

24%

Non-GMO

20%

23%

22%

19%

20%

Organic

17%

30%

21%

17%

10%

Locally Sourced Ingredients

16%

20%

16%

15%

17%

Kosher

11%

10%

None Matter

Source: ABA Power of Bakery 2019, Bakery Production Claims

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Foodservice | Coffee

COFFEE SALES, COMPETITION CLIMB “People are drinking a lot of coffee,” said Chris Moynihan, director of foodservice for Station Management Consultants’ Sunoco-branded Food Marts, which operates 14 c-stores around Philadelphia.

U.S. Coffee Revenue Growth

Revenue in the U.S. coffee segment is predicted to total $85,135 million in 2020. The market is expected to grow annually by 4.2%, according to a report by Statista.

According to the National Coffee Association (NCA) National Coffee Data Trends 2019, 63% of people reported drinking coffee within the past day — one point down from 2018 but a 6% increase from 2016. Source: Statista, August 2019 Past-day consumption of espressobased beverages is at an all-time high of 24%. And more coffee shops are opening to meet NEW OPPORTUNITIES demand. Mark DiDomenico, director of customer About a year and a half ago, Station Management Consolutions for market research ﬁrm Datassential, sultants’ Sunoco-branded Food Marts partnered with a local said the number of coffee shops in the U.S. is still roaster to come up with a new, proprietary blend, and ultigrowing, with a 9% increase in 2019. And Starmately an entire coffee brand. bucks actually outpaced that growth, he said, with The chain now offers a full-service coffee bar called Piccolo almost 11% growth in the number of units in 2019. Joe Coffee at two of its locations, as well as a Piccolo Joe “Just when you thought you couldn’t see another Coffee Express concept at four locations. Starbucks popping up, they continue to grow,” “We wanted to be ahead of the curve,” said Moynihan. DiDomenico said. The company is able to track the product in its entirety, enAnd while the number of coffee shops likely suring high-quality coffee for customers that’s 100% organic. won’t continue to increase at the same pace, Thanks to the success of Piccolo Joe, the company now growth is expected to continue in 2020. offers wholesale coffee products, including k-cups, bags and This leaves c-stores with steep competition for ready-to-drink (RTD) cans of nitro cold brew. the coffee drinker’s dollar. Knoxville, Tenn.-based Pilot Company, which operates more than 900 retail and fueling locations in the U.S. and Canada, continues to see the cold-brew and iced coffee trend grow, along with its bean-to-cup coffee program. To date, more than 85% of the chain’s locations offer bean-to-cup coffee, which guarantees fresh, hot coffee is available at all times. In 2020, the company plans to ﬁnish installs at all remaining locations. Among the trends, Jimmy Fleming, manager, category-beverage at Pilot Company, said the company sees freshness and quality as increasingly important to its customers, as well as customization, variety and sustainability. 42

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March 2020

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Beverages | Carbonated Soft Drinks

SOFT DRINKS FLAT,

BUT HEALTHY OPTIONS APPEAL In the 12 months ending Dec. 29, 2019, carbonated beverage sales exceeded $8.5 billion, according to research firm IRI. Dollar sales increased 0.8%, while unit sales dropped 4.5% over the year before. “Big mass market tried-and-true categories have had soft performance in recent years, while more niche categories are performing better,” said Gary Hemphill, managing director of research for the Beverage Marketing Corp. “An example is the high growth over the past several years of betterfor-you beverages such as sparkling water.” Hemphill explained that, while it remains a small part of the carbonated beverage category, a lot of consumers who want a healthier beverage still love their bubbles and have migrated to sparkling water. High profile launches of zerocalorie, flavored sparkling waters such as Pepsi’s bubly brand and Coke’s AHA brand are poised to compete with National Beverage Corp.’s established LaCroix brand, making for a more crowded category, but one that is likely to continue to show solid growth in 2020 and beyond. “Sparkling water is the buzz segment,” Hemphill said. Scott Zaremba, president of Zarco USA Inc., based in Lawrence, Kan., agreed, saying that the flavor and carbonation “emulates the products we grew up on but offers them in a more health-conscious way.” Zarco USA includes one free-standing convenience store, five convenience concessions and one portable convenience store.

DRIVING SALES

Another growth driver in the carbonated beverage category mentioned by Hemphill is small-size cans. “Delivering soft drinks in a range of packaging sizes has proven to be an effective way to drive sales as well as enhance profitability,” Hemphill said. “With consumers, bigger isn’t necessarily better anymore.” While consumers do like the smaller cans, Zaremba thinks they give a too-small perception when offered in the standard coolers next to regular-size products. He displays the smaller cans in a separate enclosed cooler. Consumption of traditional soft drinks has seen a decrease in the past year at the five convenience stores at the University of Iowa, but the energy drink segment has continued to grow, said Kristi Patel, assistant director for the University of Iowa’s retail operations. Because consumers tend to gravitate toward the brands and flavors with which they are familiar, it usually requires a little promotional Unit sales drop 4.5% while dollar sales remain flat for carbonated beverages for the 52 weeks ending Dec. 29., 2019. push to persuade them to C-store retailers are looking to healthy carbonated beverage options to boost sales in 2020. try something new, Patel Dollar Sales Unit Sales Price Per Unit said. She uses promotions tied to new products, such 1-Year % 1-Year % 1-Year % Product Current Current Current Change Change Change as a discount for a monthlong period to raise awareCarbonated $8.66 B 0.8% 4.59 B -4.5% $1.89 $0.10 Beverage ness and encourage trial.

Carbonated Beverage Dollar Sales Flat

Source: IRI, a Chicago-based research firm, U.S. Convenience Store All Scan Data for the 52 weeks ending Dec. 29, 2019

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March 2020

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Beverages | Cold & Frozen Dispensed

GROWING DISPENSED SALES Gen Z represents a big swath of the customer base for cold and frozen dispensed beverages. Retailers are wooing them in 2020 with new ﬂavors and deals.

cold or frozen dispensed beverage experience What best describes your experience with cold or frozen dispensed beverages from gas stations and convenience stores? (by age)

13-24 25-34 35-54

56% 47% 51%

11% 11% 6%

31% 42% 43%

Winter might not be the hottest 30% 7% 55+ 62% months for frozen dispensed beverages at Nittany Oil’s 27 MinitMart Source: CivicScience 2020, January 24-31, 2020 stores spread throughout Pennsylvania, but the drinks still rack up sales even in the coldest months, said encourage the purchase of frozen dispensed beverages, a speAngela Gearhart, the company’s food service cial deal will be available to loyalty card users. category manager. The key, noted GearSpecials such as the Fountain Club’s ‘buy a certain number to hart, is to offer a variety of flavors and switch get one free’ or ‘any size for 99 cents’ have bolstered sales of things up regularly with new ones. cold dispensed beverages, Gearhart said. The stores offer up to In January, MinitMart spiced up its selection 10 varieties of the beverages. of frozen beverages with the addition of a new array of flavors such as mango, peach, Tiger’s CORE CUSTOMER PROFILE Blood (coconut strawberry), strawberry banana In a survey conducted by research firm CivicScience between and lemon to accompany the ever-popular Jan. 24-31, 2020, the age group that most frequently purchases cherry, blue raspberry and orange. The stores cold and frozen dispensed beverages from convenience stores have up to six flavors at any given time. and gas stations is 13- to 24-year-olds (30%). The number who “The more variety, the better the sales,” very or somewhat often purchase the beverages from a c-store Gearhart said. or gas station drops to 17% for 25- to 34-year-olds and to 14% for The stores will also be rotating in limited35- to 54-year-olds. time offer (LTO) flavors, she said. To further “In the frozen beverage category in general, c-stores should try to appeal to the 13- to 24-year-old consumers who purchase them more often,” said Casey Taylor, CivicScience’s vice president of business development. “Respondents in this group agree the beverages are delicious and they would like to purchase them.” Taylor noted both men (44%) and women (45%) equally reported having a favorable view of their experience purchasing the frozen and cold dispensed beverages from a c-store. Respondents who describe food as a “passion and essential to their lifestyle and identity” are more likely to say they “very or somewhat often” purchased cold or frozen dispensed beverages from convenience stores. The survey also revealed people who frequently (once a week or more) travel out of town for business are more likely to say they “very or somewhat often” purchase cold or frozen dispensed beverages from c-stores. 46

CSTORE DECISIONS •

March 2020

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Beverages | Juices & Teas

TEA TRENDS EMERGE As consumers seek better-for-you options with reduced sugar, the juice and tea segment shifts. According to IRI, canned and bottled tea dollar sales were down 4.5% and refrigerated teas were up 6% for the 52-week period ending Dec. 29, 2019. Meanwhile, refrigerated juice was mostly flat overall, at just 1.1% growth year over year. Overall, there was a decline in the total number of regular beverages in 2019, but an increase in no-sugar/diet options, according to IRI. In 2009, there were about 700 products across all the different segments. In 2019, there were about 900, or a 32% increase in 10 years. York, Pa.-based Rutter’s currently offers 15 flavors of its branded, single-serve teas. Regular Iced Tea, Southern Brew Tea and Green Tea are the top flavors, according to Robert Perkins, vice president of marketing for Rutter’s, which operates 78 locations in Pennsylvania, West Virginia and Maryland.

Juice Sales Balance

While refrigerated juice sales were flat in 2019, some juices like pomegranate and grapefruit juice saw a dollar sales surge over last year.

Dollar Sales Product

Current

1-Year % Change

Refrigerated Juices/Drinks

$594 M

1.1%

Orange Juice

$217 M

-0.2%

Juices and Drink Smoothies

$196 M

-3.1%

Lemonade

$60.9 M

1.4%

Fruit Drink

$34.5 M

4.9%

Blended Fruit Juice

$33.7 M

20.7%

Cranberry Cocktail/Drink

$18.6 M

1.6%

Apple Juice

$17.5 M

7.8%

All Other Fruit Juice

$7.5 M

55.9%

Grape Juice

$5.1 M

10.9%

Pomegranate Juice

$1.5 M

109.2%

$235,566

81.6%

Grapefruit Juice

Source: IRI, a Chicago-based research firm, U.S. Convenience Store All Scan Data for the 52 weeks ending Dec. 29, 2019

Refrigerated Tea Sales Increase Refrigerated (RFG) teas saw increased dollar and units sales year over year at c-stores.

Dollar Sales Product Refrigerated Teas

Unit Sales

Current

1-Year % Change

Current

1-Year % Change

$217 M

6.0%

113 M

1.8%

Source: IRI, a Chicago-based research firm, U.S. Convenience Store All Scan Data for the 52 weeks ending Dec. 29, 2019

“We had an excellent summer sales period, and with added promotional activity, saw the category post strong numbers,” he said. CAPITALIZING ON TRENDS

Dandy Mini Marts also saw tea sales increase, according to Dyson Williams, director of merchandising for the Sayre, Pa.-based chain, which operates 65 stores in Pennsylvania and New York. “It seems to be coming from the more higher-end teas,” Williams said, citing Unilever’s Pure Leaf brand as an example. “We do annual cooler resets to make sure we have the correct products and product mixes in our stores.” Introducing new varieties and continued promotional activity, Perkins said, will be key to continuing the category growth in 2020.“As we’ve seen with the entire beverage category, the consumers are looking for new and innovative items,” he said. “We also recognize the importance of the ingredients being used, along with the nutritional value, when we create new beverages.” Kombucha, a fermented tea beverage, lends itself well to the better-for-you, low-sugar trend. Now a $21.8 million category, it saw 56% growth in dollar sales in the 52-week period ending Nov. 23, 2019, according to Nielsen. Kombucha’s fermentation means it’s high in probiotics, which, among its benefits, aids digestive health. The product has long been stocked at health food stores but is becoming increasingly mainstream. Rutter’s Perkins said a key component of the tea category is the idea of providing some added benefit to the consumer. “I believe healthy options for the consumer will continue to trend up as long as they feel there is an added benefit,” he said. “They are looking to avoid ‘unhealthy’ products or the perception of a product as ‘unhealthy.’”

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March 2020 • CSTORE DECISIONS

Beverages | Bottled Water & Sports Drinks

SPARKLING DRIVES

WATER SEGMENT GROWTH Sparkling water and sports drinks dollar sales are surging at c-stores. The bottled water category saw a 3.1% lift in c-store dollar sales, buoyed by a 9.5% dollar sales increase in the seltzer/ sparkling/mineral segment for the 52 weeks ending Dec. 29, 2019, according to IRI. Sports drinks saw an increase of 7.4%. Meanwhile, Nielsen reported sparkling water up 11.6% at c-stores for the 52 weeks ending Nov, 23, 2019. VERC Enterprises, which operates 33 locations in Massachusetts and southern New Hampshire, saw overall bottled water sales increase 5% in 2019 due to high growth in sparkling and premium waters, according to Meghann Eaton, beverage category manager, VERC Enterprises. “I expect to see continued growth in sparkling and premium water and some excitement in the enhanced beverages with a few new items,” Eaton said. REGIONAL VARIATION

But the success of some segments may depend on your region. Ken Jackson, vice president of retail operations for Winamac, Ind.-based Good Oil Co. Inc., which operates 15 Good to Go stores in Indiana and one in Illinois, said the trend hasn’t hit his region. “Sparkling water is not that big in this part of the country,” said Jackson. “When I was in the Northeast, we expanded three additional shelves, but here in Indiana, there’s not a big demand for it.” The stores do offer a small variety of flavored waters. But Good to Go’s customers prefer flavored-water packets, along with flavored syrups on the fountain, Jackson said. Overall, though, the chain’s water 48

CSTORE DECISIONS •

March 2020

sales are strong, thanks in part to its branded Good to Go Natural Spring Water bottles, which offer a better profit margin as well as a marketing benefit. “We’re looking at increasing our private-label offering, just because of the strength of the category,” said Jackson. “Our water just continues to grow year after year; we’re up probably over 8% in water this past year, and then with the planogram for 2020, we’re increasing our offerings even more.” ISOTONIC INNOVATION

In the sports drink realm, both VERC and Good to Go have seen success with the BODYARMOR brand. “Our sports drinks were flat in 2019,” said Eaton. “If it weren’t for BODYARMOR, we would have been down.” Overall, Jackson sees room for continued innovation in the category, especially with healthy offerings. “A little less sugar, a little healthier — I think there’s a strong market for that,” he said. “‘Functional’ is key,” Eaton said of sports drinks. “People are looking for why they need to drink this, what will it do for me. … They also like to know what the brand is doing to better the world, not just their bodies — from recyclable, giving back and how it’s better for the environment.”

Sparkling Water Shines in Water, Sports Drink Segment

Sports drinks and sparkling water sales saw strong dollar sales at c-stores in 2019, according to Nielsen data for the 52 weeks ending Nov. 23, 2019, while bottled water, tonic water, seltzer and coconut water dip.

Dollar Sales Product Water

Unit Sales

Current

1-Year % Change

Current

1-Year % Change

$2.2 B

-4.0%

1.3 B

-7.0%

Sparkling Water

$224 M

11.6%

146 M

8.8%

Tonic Water

$2.7 M

-8.2%

1.3 M

-11.9%

Coconut Water

$70.6 M

-9.6%

25.3 M

-10.7%

Seltzer Water

$35.1 M

-2.9%

22.8 M

-6.0%

Sport Drinks

$7.6 B

6.0%

4.1 B

-0.6%

Source: Nielsen data for U.S. Convenience Stores for the 52 weeks ending Nov. 23, 2019

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Beverages | Beer, Wine & Adult Beverages

ADULT BEVERAGES EVOLVE The adult beverage category has seen significant changes in recent years, with the inundation of seltzers and the introduction of craft beer to the mainstream.

Beer and Wine Sales Solid Overall beer and wine sales saw steady growth in dollar and unit sales year over year, while the sparkling wine and champagne category pushed furthest ahead.

Dollar Sales

Unit Sales

1-Year % Current 1-Year % Craft beer is still trending, and c-stores like LaProduct Current Change Change crosse, Wis.-based Kwik Trip have seen success with Beer $20 B 4.3% 789 M 1.0% exclusive, limited-release offers. In fact, Kwik Trip, which operates more than 600 stores in three states, Table Wine $1 B 2.6% 11.4 M 0.9% is currently planning its next beer, set to launch the Sparkling Wine/ $67.4 M 12.8% 498,840 7.3% first week of April. Champagne IRI reported beer dollar sales up 4.3% in 2019 Source: IRI, a Chicago-based research firm, U.S. Convenience Store All Scan Data for the 52 weeks ending Dec. 29, 2019 at c-stores, while Nielsen saw beer dollar sales decrease 1% for the 52 weeks ending Nov. 23, 2019. Meanwhile, flavored malt beverages (FMB)/coolers and FMB/ their portfolios with the introduction of Babe Wine cider segments had 24.8% and 22.5% increases, respectively. by ABI and Vizzy by MillerCoors, for example.” According to SipSource, which partners with CROSS-SEGMENT PURCHASES Nielsen to gather depletion data from wine While seltzers are big, the most important trend to watch is and spirit wholesalers, for the 12-month period cross-category purchasing between beer, liquor and wine, acending September 2019, wine sales were down cording to Lisa Ham, senior category manager – beer & center 2.2% overall, yet wine sales in the convenience store for Des Moines, Iowa-based Yesway, which operates more channel were up 2.5%. than 400 sites in nine states. Dale Stratton, data analyst for SipSource, said “As more millennials continue to drive sales, you’ll see less the convenience channel will continue to outbrand and category loyalty and more cross-segment purchases perform the overall wine market, thanks in part that will continue to dilute beer sales,” Ham said. “We think the to both increased licensing as well as alternative manufacturers have realized this and have started to expand packaging such as canned wine, which lends itself well to the c-store space. C-store spirit sales are especially strong, according to SipSource. For the 12-month period ending September 2019, spirit sales grew 6.9% Cider and beer dip while flavored malt beverage (FMB)/ciders and FMB/coolers soar. in the convenience channel compared to 3.2% Dollar Sales Unit Sales overall. Overall pre-mixed, ready-to-drink (RTD) 1-Year % 1-Year % cocktail sales grew 8.1%. Product Current Change Current Change Stratton anticipates a similar trajectory in 2020. Total Beer/ $16.8 B 1.1% 3.1 B -0.6% Also on the horizon for 2020, Stratton believes Flavored Malt that the ‘sober-curious’ movement is a real threat, Beverage/Cider and it’s not just limited to young consumers. Beer $14.9 B -1.0% 2.6 B -2.7% Rather, it’s tied to the health and wellness trend. Flavored Malt The key will be to focus on what today’s con$1.9 B 22.5% 561 M 10.6% Beverage/Cider sumers really want from their adult beverages Cider $108 M -5.8% 21.9 M -6.6% and adjust accordingly. “The most important thing to realize is consumers Flavored Malt $1.8 B 24.8% 539 M 11.4% Beverage/Coolers aren’t necessarily drinking less,” said Ham, “they’re just finding other sectors to meet their needs.” Nielsen data for convenience stores for the 52 weeks ending Nov. 23, 2019

Total Beer Sales Steady

CSTORE DECISIONS •

March 2020

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Beverages | Energy Drinks

ENERGY DRINKS ANTICIPATE UPBEAT 2020 The energy drinks category lived up to its name in 2019 with an overall category growth of 10.8% in dollar sales, according to figures compiled by IRI. “Energy drinks have been on a solid growth trajectory in recent years and, in fact, saw accelerated growth in 2019 due to the innovation around performance energy drinks,” said Gary Hemphill, managing director of research for industry consulting group Beverage Marketing Corp. “We believe 2020 will be another solid year of growth for the category.” Data from Nielsen shows that energy drinks dollar sales have risen the past three years. What’s driving this growth? Category innovation, according to Hemphill. Energy brand Bang registered the biggest dollar growth, with a leap of more than 250% higher than the previous year, pulling it into orbit just below category stalwarts Monster and Red Bull. “And with the success of Bang, mainly, the ‘interesting flavors’ and combos are growing in popularity in other brands, as well,” said Mike Nelson, senior category manager with Plaid Pantry, operating 110 stores in Oregon and Washington. OUTLOOK POSITIVE

The Bang tide seems to be lifting all boats, according to BMC’s Hemphill. “The development of the performance energy segment pioneered by Bang has been the biggest development in recent years,” Hemphill said.

Top Energy Drink Brands by Dollar Sales Red Bull leads, but VPX Bang by Vital Pharmaceuticals Inc. climbs the charts.

Dollar Sales

Unit Sales

Product

Current

1-Year % Change

Current

1-Year % Change

Total SS Energy Drinks NonAseptic

$9.27 B

10.8%

3.54 B

7.6%

Red Bull

$2.13 B

-3.3%

680 M

-3.2%

Monster Energy

$1.19 B

-0.9%

484 M

-6.7%

VPX Bang

$844 M

250.8%

331 M

239.9%

Source: IRI, a Chicago-based research firm, U.S. Convenience Store All Scan Data for the 52 weeks ending Dec. 29, 2019

“Other products like Reign and C4 have helped to give credibility to this segment — and drive sales.” How strong is the performance energy segment? Strong enough for Irving, Texas-based 7-Eleven to launch its own proprietary brand, Quake. Nelson said that the strength of the segment is another factor that’ll drive sales higher this year. There are other successes in the category, as well. “We have also seen tremendous growth in ‘alternative’ energy drinks as well, with Guayakí Yerba Mate in particular being incredibly strong,” said Plaid Pantry’s Nelson, adding that consumers seem to be gravitating toward low- and no-sugar options. Nelson is also broadening his brand mix for the coming year, including what he sees as up-and-coming players — and one classic brand introducing a novel offering. “I really think KDP’s Adrenaline Shoc is going to be good, as well as Celsius,” said Nelson. “Coke is going to dedicate a lot to their Coke Energy roll out. That could be very big for them — and us.”

Energy DrinkS Momentum Rising

Energy drinks dollar sales were up 11.1% in 2019 with a compound annual growth rate of almost 6% over the past four years, according to Nielsen data for all outlets, plus convenience stores. The data reflects an inclusive view of UPC-coded and random-weight items for all outlets except the c-stores, where data includes UPC-coded items only. Category Energy Drinks

Compound annual dollar growth rate over 4 years

Compound annual unit growth rate over 4 years

Dollar Sales for the 52 weeks ending Dec. 28, 2019

1-Year % Change

Unit Sales for the 52 weeks ending Dec. 28, 2019

1-Year % Change

5.9%

4.7%

$12.62 B

11.1%

4.76 B

Source: Nielsen data for all outlets, plus convenience for the period ending Dec. 28, 2019

CSTORE DECISIONS •

March 2020

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Beverages | Energy Shots

SHOTS OVERSHADOWED

BY OTHER ENERGY OPTIONS Energy shots are down 5.5% year to year in c-stores, according to IRI — but that’s due largely to increased competition in the energy segment overall, not a waning consumer desire for more ‘get up and go.’ “Coffee ready-to-drinks, energy and fitness pre-workout beverages are the current heroes in the energy category,” said Marisa Wolfe Conner, a spokesperson for the Army & Air Force Exchange Service (AAFES), which operates 334 Express convenience stores. “Energy shots are down 9% compared to last year. 5-hour Energy is still the leader and driving the shot business.” AAFES is seeing a decline in energy shots at its stores because shoppers are moving to functional ready-to-drink (RTD) beverages with energy and other ingredients, such as BCAAs (branch chain amino acids), Conner said. “With the rise of energy beverages, the energy shot companies will try to reinvigorate business through additional investments in their brand by targeting core consumers, introducing new trending flavors and investing in experiential promotions.” To move more product, Conner suggested c-store retailers place energy shots in multiple locations within the store to drive impulse shopping. “They can also keep displays full and clean and advertise pricing clearly, calling out any multi-unit discounts,” she said. One factor in energy shots’ slipping sales may be the lack of competition in the shots segment specifically, which Roger Dilworth, senior analyst for Beverage Marketing Corp., suggested may act as a stagnating influence.

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Shots Sales Stall

Energy shots dip as customers seeking energy find numerous options, including an influx of new energy drinks and cold coffee options.

Dollar Sales

1-Year % Change

SS Energy Drinks NonAseptic

$9.27 B

10.8%

Cappuccino/Iced Coffee

$1.76 B

5.3%

SS Energy Shot

$675 M

-5.5%

Segment

Top Three for Energy

5-hour Energy, Tweaker and VPX Redline Xtreme led the energy shots category in dollar sales for the 52 weeks ending Dec. 29, 2019.

Energy Shots

Dollar Sales

1-Year % Change

5-hour Energy

$619 M

-6.0%

Tweaker

$20.4 M

2.2%

VPX Redline Xtreme

$5.8 M

18.1%

Source: IRI, a Chicago-based research ﬁrm, U.S. Convenience Store All Scan Data for the 52 weeks ending Dec. 29, 2019

FUTURE CONSIDERATIONS

“In contrast to Red Bull, which had Monster as a ﬁerce competitor, the energy shot segment has been dominated by 5-hour Energy,” Dilworth said. “Although it has had effective advertising with its ‘2:30 Feeling’ messaging, the energy drink players have been very innovative in capturing ‘white spaces’ such as low-calorie (for example, Monster Ultra, Red Bull Total Zero), teas (Monster Rehab) and coffee (Java Monster). This has kept the aging consumer from an expected shift from ‘youthful’ energy drinks to ‘adult’ energy shots.” “While 5-hour Energy still has a dominant share, the future is looking toward ‘better for you’ energy shots,” said Steven Montgomery, president of b2b Solutions LLC in Lake Forest, Ill. “Bang is following up on their RTD products with shots, and there are others as well in this newer segment.” Placement is the challenge, with 5-hour dominating the rack space on the front counter. “The entire energy shot segment volume has been challenging, but new entrants like Bang should help,” Montgomery said. March 2020 • CSTORE DECISIONS

Snacks | Meat Snacks

MEAT SNACKS:

CLASSICS STEADY, FLAVORS ARE READY The meat snack category as a whole has looked solid for the past four years, seeing a dollar sales 4.8% compound annual growth rate (CAGR), according to Nielsen total U.S. data for all outlets, plus convenience for the period ending Dec. 28, 2019. Beef sticks performed even better, with a 7.6% CAGR in dollar sales with the steak and bar form segment even stronger, turning in a dollar CAGR of 9.7%. The old standard Slim Jim was tops in dollar sales not just among non-jerky segments, but all meat snack types, showing growth of 5.1%, with Jack Link’s non-jerky products on its heels and outpacing with 7.6% growth, according to IRI convenience all scan data for the 52 weeks ending Dec. 29, 2019. In jerky, Jack Link’s rules the barn with a steady gait, but Old Trapper’s jerky made a big 14% gain from the previous year. Still, while jerky is the rock of the category, manufacturers would like to build on that foundation. That means enticing new customers with new flavors.

Meat Snacks Keep Solid Form In the meat snacks category, bars held strong, while sticks sales grew nearly 12% for the 52 weeks ending Dec. 28, 2019, according to total U.S. Nielsen data for all outlets combined, plus convenience — includes grocery stores, drug stores, mass merchandisers, convenience stores, select dollar stores, select warehouse clubs and military commissaries (DeCA). The data reflects an inclusive view of UPC-coded and random-weight/ non-UPC-coded items for all outlets except for the c-stores where data includes only UPC-coded items. Product

Dollar Sales

1-Year % Change

Unit Sales

1-Year % Change

Jerky

$1.42 B

2.2%

228 M

-2%

Meat and Cheese Combo

$94.2 M

3.6%

53.2 M

0.7%

Nuggets and Tenders

$70.2 M

-15.2%

17.0 M

-4.7%

Steak, Kippered and Bars

$446 M

6.2%

117 M

0.8%

$1.2 B

11.9%

546 M

5.8%

Sticks

Source: Nielsen data for the 52 weeks ending Dec. 28, 2019

CSTORE DECISIONS •

March 2020

“I think flavored is growing in that segment,” said Joseph Bickham, president of Fuel City, which has five stores in the DallasFt. Worth metroplex. “They’re coming out with all different types of flavors. … It’s done really well.” And don’t forget the consumer appeal of buying local. “Late last year, I did a test with a local company out of Louisville — Derby City Jerky — in a few stores, and the test was so successful that I’m getting ready to roll out to the rest of our stores,” said Mark McCarty, director of category management with Clark’s Pump-N-Shop, which operates 67 stores in Kentucky, Ohio, West Virginia and Florida. Fuel City also recognizes the wisdom of carrying hometown products. “We have Jack Link’s and some of the large (brands), but we also have some of the more local cured,” Bickham said. Still, his bestseller is traditional flavor, with teriyaki running right behind. “I feel that, in 2020, meat snack companies will continue to expand on their flavor profiles, which I believe helps to drive trial in the category,” McCarty said. And driving trial among snackers who don’t usually buy the classic meat snacks means creating opportunities for growth. Classic meat snack flavors make for a solid foundation to build sales through form and flavor innovation.

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Snacks | Salty Snacks

SALTY SNACKS

SET FOR STRONG 2020 Americans’ craving for salty snacks continues to climb. Dollar sales for the overall salty snacks category grew 6% for the 52 weeks ending Dec. 29, 2019, according to IRI convenience all scan data. Salty snacks perceived as ‘better for you’ (BFY) are trending, but placement is key, as is being first on the street with new product innovation. U.S. demand for salty snacks at the manufacturer level is forecast to reach $28.3 billion in 2022, according to Daniel Granderson, communications manager of market research firm Packaged Facts. Population growth and increasing disposable income levels are expected drive sales.

In 2020, look for consumers to continue to crave salty snacks as an indulgence, while marketers also offer new launches to appeal to a growing niche seeking BFY snacks. “In our case, this is due mostly to improved service by directstore-delivery (DSD) vendors,” said Mike Jackson, category manager for High’s convenience stores, a Baltimore, Md.-based chain of 49 c-stores serving the Mid-Atlantic region. High’s works hard to develop the ideal planograms to maximize sales. “New flavor profiles and strong promotions have helped push sales even higher,” Jackson said. “On the warehouse salty-snack side, we have tried to bring in the new items as quickly as possible to help keep the planograms fresh and interesting, while relying on old staples to provide steady sales.” The chain carries three DSD salty snack brands in its stores: one national, Frito-Lay, and two more local brands, Utz and Herr’s. All

Top Potato Chip Brands by Dollar Sales Lay’s Potato Chips led chip sales with $550 million in dollar sales up 6.3%, for the 52 weeks ending Dec. 29, 2019, according to IRI convenience all scan data. Current Dollar Sales

1-Year % Change

Lay's - Potato Chips

$550 M

6.3%

Ruffles - Potato Chips

$318 M

-7.5%

Pringles - Potato Chips

$173 M

4.5%

Lay's Kettle Cooked - Potato Chips

$75.7 M

-7.5%

Source: IRI, a Chicago-based research firm, U.S. Convenience Store All Scan Data for the 52 weeks ending Dec. 29, 2019

CSTORE DECISIONS •

March 2020

Salty snacks enjoyed a 6% increase in dollar sales for the 52 weeks ending Dec. 29, 2019, according to IRI convenience all scan data. Cheese snacks saw a 12.2% bump over last year, while potato chips grew 4% and pretzels 5.5% year-over-year. Current Dollar Sales

1-Year % Change

Salty Snacks

$5.88 B

6.0%

Potato Chips

$1.83 B

4.0%

Cheese Snacks

$822 M

12.2%

Pretzels

$263 M

5.5%

Product

Source: IRI, a Chicago-based research firm, U.S. Convenience Store All Scan Data for the 52 weeks ending Dec. 29, 2019

FINE-TUNING PLANOGRAMS

Product

Salty Snack Sales Soar

three offer core signature items and have done well at High’s for the past few years. “I expect by continuing to fine-tune planograms, we will continue to see growth from these three brands in 2020,” Jackson said. “In warehouse salty snacks, the big sales are coming from Combos, Bugles, Cheez-It and Chex Mix. Some newer brands such as Paqui have done very well, also.” HOLD THE SALT

For shoppers of all ages, salt is in danger of becoming “the new sugar — the ingredient everyone loves to hate,” said Ryan Mathews, founder and CEO of Black Monk Consulting. “So, low-sodium and lower-sodium snacks should gain share over time.” Mathews urged retailers to think about ways to build variety into an otherwise salty category. “Do it with items like veggie chips, other than potatoes, whole-grain products and other items that let the shopper feel good about ‘eating healthy’ at the same time they are enjoying a snack.” “Don’t fight the health-food trend,” he said. “Learn how to ride the wave.”

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Snacks | Sweet Snacks & Bars

SWEET SNACKS APPEAL

WITH HEALTHY & INDULGENT OPTIONS From snack cakes to food bars and granola bars, sweet snacks fill an irreplaceable niche in c-stores. The category continues to appeal to consumers who often alternate between desires for health-consciousness and indulgence. Ray Johnson, operations manager for Henderson, Nev.-based Speedee Mart Inc., with 23 locations in Las Vegas, expects that dichotomy in consumers’ buying habits to continue. “Expect this category to continue to grow, as it is ‘better for you.’”

Top Granola Bars by Dollar Sales

The top-three-selling granola bars saw dollar sales dips over the previous year. Dollar Sales

1-Year % Change

Granola Bars

$89.1 M

-8.4%

Nature Valley - Granola Bars

$35.4 M

-2.1%

Nature Valley Sweet & Salty Nut - Granola Bars

$19.2 M

-2.1%

Sunbelt Bakery - Granola Bars

$13.2 M

-9.2%

Product

Source: IRI, a Chicago-based research firm, U.S. Convenience Store All Scan Data for the 52 weeks ending Dec. 29, 2019

INNOVATION & VALUE

Sales of pastries have stayed strong, noted JohnJackson predicted top brands will remain on top in 2020, son, while “the energy bars have all the innovations.” while newer nutritional bar launches climb the rankings. “The best flavors are always chocolate and peanut At the Army & Air Force Exchange Service, which operates butter,” he added. “New flavors (include) birthday 334 Express c-stores, shoppers want cleaner ingredients, parcake and doughnut.” ticularly natural and organic products high in protein and low Blue-collar men seeking a quick-and-easy in added sugars, said spokesperson Marisa Wolfe Conner. breakfast item or treat continue to represent the Plant-based snacking and bars are driving the segment in primary sweet snacks consumer, Johnson said, military stores. Flavors such as salted caramel dark chocolate, adding that “some customers opt for the presumed peanut butter and almond butter are among the best sellers. healthier options of the nutritional bar set.” “The Exchange expects to see more plant-based vendors Limited-time offers (LTOs) have been a hit with entering the marketplace in 2020,” Conner predicted, customers, as are items co-branded with other advising others to “add new natural/organic items to manufacturers, such as snack cakes with the existing planograms and create a dual location in-store Hershey’s or Reese’s name attached. solely dedicated to natural/organic items by daypart.” “Customers are purchasing the LTOs heavily when they come out,” agreed Mike Jackson, category manager for Baltimore-based High’s, which operates 49 locations. Snack bars, including granola and breakfast bars, all saw a dip in dollar and unit sales “Limited-time colors and flavors sell very year over year. well when released. We are also seeing a Unit spike in purchases of Latino staples.” Dollar 1-Year % 1-Year % Product Sales Change Change Sales Customers are also seeking value when it comes to snack cakes. To maximize Snack Bars/Granola Bars $858 M -2.1% 482 M -6.2% impulse sales, Jackson recommended cBreakfast/Cereal/Snack Bars $190 M -1.3% 131 M -8.6% stores keep the snack cakes and breakfast Granola Bars $89.1 M -8.4% 108 M -8.1% and nutrition bars as close to the coffee Nutritional/ bar as possible. “Have separate sets $577 M -1.3% 242 M -3.9% Intrinsic Health Value Bars for the breakfast bars and nutrition bars. This helps you to have a larger variety of All Other Snack/Granola Bars $1.74 M -1.7% 1.10 M -13.0% products.” Source: IRI, a Chicago-based research firm, U.S. Convenience Store All Scan Data for the 52 weeks ending Dec. 29, 2019

Snack Bar Sales Dip

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March 2020 •

CSTORE DECISIONS

Snacks | Seeds & Nuts

SEEDS, NUTS

RIPE FOR IMPULSE SALES In 2020, seeds and nuts sales are being driven by flavor innovations, increased assortments, as well as promotional offers with creative in-store displays and end caps that generate excitement. Particularly effective are themed floor displays during key seasons and promotions featured on end caps.

Seeds & Nuts Sales Hold Steady Both seeds and nuts saw a dollar sales boost in 2019, albeit a similar dip in unit sales. Toasted corn nuts saw a 5% rise in dollar sales and a 3% bump in unit sales at c-stores for the 52 weeks ending Dec. 29, 2019, accoring to IRI. Unit Sales

Dollar Sales

1-Year % Change

Snack Nuts/Seeds/Corn Nuts

$995 M

2.4%

679 M

-2.4%

Snack Nuts

$643 M

2.1%

440 M

-2.8%

Sunflower/Pumpkin Seeds

$301 M

2.4%

208 M

-2.4%

Toasted Corn Nut Snacks

$50.9 M

5.0%

31.4 M

3.0%

Product

1-Year % Change

Source: IRI, a Chicago-based research firm, U.S. Convenience Store All Scan Data for the 52 weeks ending Dec. 29, 2019

When it comes to the sunflower/pumpkin seeds segment, DAVID, Spitz, Frito-Lay and BIGS led the category in dollar sales at c-stores for the 52 weeks ending Dec. 29, 2019, according to IRI. In the snack nuts segment, Planters, Wonderful, Nut Harvest and Blue Diamond led in dollar sales for the same period. Retailers expect continued growth of hot-and-spicy flavor profiles, plant-based snacks, better-for-you products (natural/organic, minimally processed, gluten-free, vegan), superfoods and paleo- or ketofriendly products. IMPULSE OPPORTUNITIES

IRI data for the 52 weeks ending Dec. 29, 2019, shows seeds dollar sales are up 2.4% at U.S. c-stores, with unit sales down 2.4% for the period. Snack nuts were up 2.1% in dollar sales, with unit sales down 2.8%. Bob Phibbs, a small business consultant based in Coxsackie, N.Y., urged c-store operators to build on the impulse aspect of seeds and nuts with short, almost subliminal messaging. He recommended a sign that simply reads, “Munchies?” as an effective way to appeal directly to the cues that trigger impulse purchases in the first place. Impulse drives sales for Neissan Koroghli, a 7-Eleven franchisee in Las Vegas. Seeds and nuts represent a popular product in a major tourist city like Las Vegas. Koroghil’s top-selling sunflower and pumpkin seed line is DAVID. The whole-roasted product line is a favorite among health-conscious consumers, in part because it contains no certified synthetic colors or artificial flavors. Frito-Lay Original Sunflower Seeds is another strong seller. His topselling nut lines sell for 99 cents to $1.69. Five-ounce bags of pistachio nuts, which retail for $4, are also strong sellers at his stores. 58

CSTORE DECISIONS •

March 2020

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Healthy & Beauty Aids | Personal Care, Cosmetics & Medicine

NATURAL, WELLNESS TREND IN HBA Convenience store operators can succeed with the health and beauty aids (HBA) section in 2020 by focusing on retailing basics, advised Steven Montgomery, president of b2b Solutions LLC in Lake Forest, Ill. “This category is not glamourous, but pay some attention to seasonal opportunities like suntan lotion in the summer,” he added. Wellness is also trending in the category. “Don’t be surprised if you start seeing more and more companies shifting their focus from health and beauty to health and wellness,” said Eric Patterson, merchandising manager for Beacon & Bridge Market, a family-owned, Flint, Mich.based c-store chain with 25 locations. He expects CBD-based products, vitamins, supplements and recovery supplements will work their way into health and beauty sections by the end of 2020. NATURAL BEAUTY

Meanwhile, demand for natural, clean and sustainable beauty products is driving sales at the Army & Air Force Exchange Service (AAFES), which operates 334 Express c-stores. “This trend is expected to continue in 2020,” noted Marisa Wolfe Conner, public relations specialist II, executive group for AAFES. “Other driving factors include new innovation, competitive pricing and exciting promotional events in the HBA division.” HBA items with charcoal have proven to be strong sellers, Conner said. The Exchange system also saw a significant

Health Products Dollar Sales Grow While cold/allergy/sinus tablets and liquids, and internal analgesics sales all saw dollar sales increases in 2019, vitamin dollar sales saw the biggest bump with 27.2% growth over the 52 weeks ending Dec. 29, 2019. Product

Current

1-Year % Change

Cold/Allergy/Sinus Liquids

$41.2 M

4.5%

Cold/Allergy/Sinus Tablets

$163 M

5.3%

Internal Analgesics

$407 M

1.1%

Vitamins

$261 M

27.2%

Source: IRI, a Chicago-based research firm, U.S. Convenience Store All Scan Data for the 52 weeks ending Dec. 29, 2019 cstoredecisions.com

Beauty Sales Drop Eye, facial and lip cosmetic sales saw double-digit declines at convenience stores over the 52-weeks ending Dec. 29, 2019, according to IRI. Meanwhile, lip treatments proved a bright spot with dollar sales up 339.6%. Product

Current

1-Year % Change

Shampoo

$4.1 M

2.5%

Cosmetics - Eye

$326,874

-51.2%

Cosmetics - Facial

$510,283

-46.1%

Cosmetics - Lip

$421,078

-34.0%

Lip Treatments

$4,968

339.6%

Source: IRI, a Chicago-based research firm, U.S. Convenience Store All Scan Data for the 52 weeks ending Dec. 29, 2019

growth of premium skincare brands. AAFES expects to see continued growth in the HBA category in e-commerce channels as the shopping pattern is moving more online. “The Exchange also expects to see an increase in men’s grooming sales, and the continuation of the lashes category that is trending,” Conner said. “Newness continues to drive top-line sales.” Private-label items are appearing as premium national brand equivalents. “More niche specialty brands are emerging in the market,” Conner said. “The Exchange is adding more of these brands to the assortment to increase bottom-line profits where it has become more difficult to maintain general merchandise with the national brands.” Shoppers are still embracing natural products, so the Exchange is aggressively adding more clean and natural items to the assortment. “Millennial and Gen Z shoppers have different shopping habits than the traditional customer,” said Conner. “The Exchange is adjusting to the needs and wants of these customers.” March 2020 •

CSTORE DECISIONS

Dairy | M i l k & I c e C r e a m

ICE CREAM & DAIRY EXPERIMENT

WITH PLANT-BASED, FUNCTIONAL AND BFY Look for an uptick in functional ingredients and better-for-you (BFY) ice cream varieties in 2020 that allow customers to indulge guilt-free. Think functional frozen yogurt offerings featuring probiotics, or functional ice creams that provide energy through essential vitamins or act as a sleep aid, noted Hannah Spencer, foodservice analyst for market research firm Mintel. Mintel also found consumers are increasingly seeking non-dairy and plant-based ice cream options.

Coconut Milk Climbs

While many milk and plant-based milks see dollar sales declines year over year, both refrigerated (RFG) and ready-to-drink coconut milks surge. Current

1-Year % Change

Milk

$1.35 B

-6.8%

RFG Whole Milk

$509 M

-3.8%

RFG Skim/Lowfat Milk

$ 468 M

-11.0%

$2.7 M

-22.4%

$130,306

-37.2%

Product

RFG Almond Milk

NON-DAIRY DELIGHTS

RFG Soy Milk

“Oat milk is gathering attention as a non-dairy milk option as RFG Coconut Milk $99,516 180.8% its creamy texture and taste are more similar to cow’s milk than RTD Almond Milk $2.5 M 61.9% other non-dairy milk options,” Spencer said. Ice cream makers are RTD Coconut Milk $847,873 395.3% creating products to meet the demand. Market research firm IRI found refrigerated and ready-to-drink SS Yogurt/Yogurt Drinks $460,890 -9.7% coconut milk were up 180.8% and 395.3% respectively over last RTD Soy Milk $118,587 -24.0% year for the 52 weeks ending Dec. 29, 2019, according to all scan IRI, a Chicago-based research firm, U.S. Convenience Store All Scan Data for the 52 weeks ending Dec. 29, 2019 convenience data. Younger customers especially are seeking BFY and dairy-free options. Some 24% of Gen Zers are interested in BFY options, compared to 20% of the total population, while 19% of millennials are interested in dairy-free compared to 13% of the total population, Spencer noted. Baltimore-based High’s, with 49 stores in Maryland, sees the trend toward dairy-free ice cream, said Sherryn Diamond, director of food service for High’s. “However, our sales are showing us that our guests are looking for an indulgent treat that our High’s ice cream provides.” She also sees mix-ins, such as candy or fruit trending. GOOD, OLD-FASHIONED ICE CREAM

Frozen Yogurt Marks Sweet Spot in Ice Cream Segment

The ice cream and sherbet segment saw dollar sales of $536 million. Frozen yogurt/tofu and ice milk/frozen dairy dessert saw sales bumps of 7.9% and 4.4% respectively, while the rest of the segment was flat to down over the previous year. Product

Current

1-Year % Change

Ice Cream/Sherbet

$536 M

1.2%

Ice Cream

$520 M

1.2%

Ice Milk/Frozen Dairy Dessert

$9.83 M

4.4%

Sherbet/Sorbet/Ices

$3.92 M

-6.1%

Frozen Yogurt/Tofu

$2.62 M

7.9%

Novelties/Frozen

$778 M

-0.2%

IRI, a Chicago-based research firm, U.S. Convenience Store All Scan Data for the 52 weeks ending Dec. 29, 2019

CSTORE DECISIONS •

March 2020

High’s is known for its super-premium ice cream “made the old-fashioned way” with fresh cream, natural ingredients and slow-churned to maximum creaminess, Diamond said. In 2019, High’s expanded on its core eight flavors, adding six new varieties that include Mad Cow Fudge, a fudge swirled ice cream with multiple candy mix-ins, and Moo-Berry Oat Crumble, a creamy frozen yogurt with fresh Maine blueberries. To celebrate its ice cream heritage, new High’s stores and remodels include a sit-down ice cream counter. While the chain’s focus is on the High’s ice cream brand, it also sells Ben & Jerry’s, Talenti and novelty ice cream. Ahead for 2020, High’s plans to expand its menu, adding three or four sundaes and new milkshake combinations. Opportunity also exists for c-stores in pint-sized ice cream, which is portable, shareable, offers built-in portion control and adds novelty to the freezer case, Mintel’s Spencer advised. Mintel found 15% of customers are interested in pint-sized ice cream options, while 33% are interested in pint-sized items in general.

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Confections | Chocolate

CHOCOLATE INNOVATION CONTINUES Chocolate dollar sales totaled $2.93 billion, up 1.2% for the 52 weeks ending Dec. 29, 2019, according to U.S. convenience store all scan data from IRI, a Chicago-based research firm. Unit sales totaled 1.7 billion, down 3.1%. Novelty chocolate candy saw a 3.9% boost in dollar sales and a 15.6% climb in unit sales for the same period. Sugar-free chocolate saw dollar sales grow 12.7%. “With chocolate, there is a lot of new innovation coming up right now,” said Mike Askwith, chief operating officer for PBD USA Inc. in Elmhurst, Ill., which includes 25 owned and franchised locations in Illinois, Georgia and Florida. “A lot of it has to do with dark chocolate and some of the higher-end chocolates coming out.” As competition between chocolate brands heats up, new products are offering increased opportunities for retailers. “We’ve got a lot of limited-time introductions,” Askwith said, pointing to Hershey’s mint and dark chocolate Kit Kat Duos, as an example. “They introduced Duos, which are really, really just fantastic

Dollar Shares of U.S. Mass Retail

Chocolate Candy by Top Marketers Private label 2% All other

Ferrero

Lindt & Sprüngli

12%

Hershey 42%

Mars 27% Source: Packaged Facts, U.S. Market Trends and Opportunities, June 2018

CSTORE DECISIONS •

Chocolate candy items larger than 3.5 ounces saw a dollar sales bump of 2%, novelty chocolate sales grew almost 4%, and sugar-free chocolate sales climbed 12.7%, for the 52 weeks ending Dec. 29, 2019, according to IRI. Dollar Sales Product

Current

1-Year % Change

Chocolate Candy

$2.93 B

1.2%

Chocolate Candy Box/Bag/Bar < 3.5 ounces

$2.38 B

0.9%

Chocolate Candy Box/Bag/Bar > 3.5 ounces

$384 M

2.0%

Novelty Chocolate Candy

$2.64 M

3.9%

Chocolate Candy Snack Size

$2.61 M

-25.9%

Sugar-Free Chocolate Candy

$278,154

12.7%

Source: IRI, a Chicago-based research firm, U.S. Convenience Store All Scan Data for the 52 weeks ending Dec. 29, 2019

products. A lot of chocolate items are coming out now that include ingredients like coffee; synergies (are) building on different ways of doing business. … It’s exciting.” Price pressures, however, challenge the category in c-stores. “There have been three price increases in the last two years,” Askwith said. “If you look at the price of entry, in a lot of cases we’re seeing $1.49 for a standard-size bar without promotional activity and breaking the barrier of $2 for those king-size bars.” Meanwhile, other retail channels including grocery, dollar stores and club stores are able to better compete on price. “For example, at Dollar General or Dollar Tree or Family Dollar, most of the standard-size bars are sitting right around $1 or less — like 89 cents, in some cases,” Askwith said. INCREASING SALES

10%

Novelty and Sugar-Free Chocolate Strike A Chord with Customers

March 2020

Steve Nachwalter, founder and principal of Nachwalter Consulting Group in Las Vegas, offered strategies for growing chocolate sales in 2020: • Product placement. “Put it where people are so that they come across it. Have good, eye-catching packaging and a natural flow that brings you to that product,” Nachwalter said. This can include cross-merchandising near the coffee bar and beverage case. • Have the employees in the store promote the product. “’Hey, have you tried this? Hey, we have this on sale. Hey, if you buy one of these, you get one of these free.’ Something along those lines,” he said.

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Confections | Non-Chocolate, Gum & Mints

BFY CONFECTIONS APPEAL Non-chocolate candies — gum, mints, gummy, sour confections and more — represent perennial favorites, and they are increasingly playing in the better-for-you (BFY) arena. “Take-home and king-size packages are doing very well,” said Eric Patterson, merchandising manager for Beacon & Bridge Market, a family-owned, Flint, Mich.-based c-store chain with 25 locations. “Customers are shifting away from single-serve because they want to have something sweet to snack on here and there throughout the day.” At the same time, candy companies are co-branding with other familiar flavors, such as Sour Patch Kids Crush Soda Fruit Mix, in an attempt to draw new entries into the category, Patterson pointed out.

convenience store all scan data for the 52 weeks ending Dec. 29, 2019. According to Packaged Facts, consumers are seeing a bevy of good-for-you new products in the non-chocolate candy category, including: BETTER FOR YOU • Formulations with simple and pure ingredients, Health and wellness are becoming more important to shoppers. no allergens and/or no artificial ingredients Consumer demand for clean labels and the media’s focus on well• Function ness are expected to continue to influence the industry and fuel • Novelty and seasonal shapes, inclusions, further expansion of functional foods. Look for continued growth packaging and interactive features in BFY candy, sour and gummy candy, and innovations. • Bolder, intense flavor American consumers are willing to pay a higher retail for • Bolder flavor with a one-two punch healthier options. Emerging plant-based, non-GMO and sugar• Sour flavors, which are a longstanding hit in free brands are gaining market share. sugar candies For example, sugar-free diet candy saw a dollar sales lift • Flavor collisions, confectionery hybrids and of 5.9% and unit sales growth of 3.4%, while sugarless gum category hopping enjoyed a dollar sales boost of 2.8%, according to IRI U.S. • Distinctive but practical packaging To maximize success in the BFY non-chocolate segment, c-store retailNon-chocolate candy dollar sales grew 4%, while gum sales grew 1.5%, according to IRI convenience ers need to first ask themselves who store all scan data for the 52 weeks ending Dec. 29, 2019. Overall gum sales were buoyed by sugartheir customer is, advised Dr. Colleen less gum’s dollar sales contribution, while regular gum sales dropped by 4.4% Meyer, a principal in Meyer and Mintz Dollar Sales Unit Sales Consulting in Forest Falls, Calif. In response to that question, “I 1-Year % 1-Year % Current Product Current Change Change have had many businesses say, ‘Everyone!’ No, it is not everyone,” Non-Chocolate Candy $ 2.14 B 4.0% 1.44 B -1.2% Meyer said. “They must target the Sugar-Free Diet Candy $997,095 5.9% 454,830 3.4% consumer who is interested in that Gum $1.07 B 1.5% 641 M -6.8% type of (BFY) product.” The type of consumer who would Sugarless Gum $896 M 2.8% 460 M -6.5% purchase BFY non-chocolate candies Regular Gum $175 M -4.4% 181 M -7.4% includes health-conscious individuals, (No Sugarless) people who go to the gym, runners, Breath Fresheners $236 M -0.6% 114 M -4.3% bicyclists and those who play sports. Source: IRI, a Chicago-based research firm, U.S. Convenience Store All Scan Data for the 52 weeks ending Dec. 29, 2019

Sugarless and Sugar-free Offerings See Dollar Sales Bump

CSTORE DECISIONS •

March 2020

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Tobacco | Cigarettes

CIGARETTES FACE NEW BATTLES For convenience stores in 16 states, implementing 21 as the federal minimum purchase age on tobacco products was a nonissue. They had already made the necessary signage and point-of-sale verification adjustments to abide by state tobacco-21 and experienced the fallout. “When we went to 21, we didn’t see a very big sales decrease,” said Reilly Robinson Musser, vice president of marketing and merchandising for Robinson Oil Corp. The Santa Clara, Calif.-based retailer operates 34 Rotten Robbie c-stores. For businesses in other states, the transition stirred up confusion. The Food and Drug Administration (FDA) stated that the law took effect immediately after it was signed by President Donald Trump in December. However, it also announced a transition period for stores to update systems and placards. Plus, federal law allots 180 days for the agency to rewrite its guidance and another 90 days for implementation. Some state and county officials have declared they won’t enforce the 21 minimum until the FDA finalizes its policy. Both the National Association of Convenience Stores (NACS) and National Association of Tobacco Outlets (NATO) advised retailers to immediately enforce the new age restriction. Ironically, some c-stores may actually benefit from the new national age. For the past several years, cities independently passed tobacco-21 ordinances, but not all neighboring towns followed suit, thus creating competition for cigarette sales. Now federal law supersedes local ordinances, so all retailers must follow the same rule.

Menthol Momentum

Year after year, menthol cigarettes claim greater market share. Year

Menthol Market Share

Non-Menthol Market Share

2014

33%

67%

2015

34%

66%

2016

35%

65%

2017

36%

64%

2018

36%

64%

Source: Federal Trade Commission Cigarette Report for 2018, Issued December 2019, retrieved Feb. 1, 2020

CSTORE DECISIONS •

March 2020

The Ups and Downs of Cigarette Sales

Bumps in prices attempt to compensate for drops in c-store sales.

C-Store Performance

Current

1-Year % Change

Dollar Sales

$55.7 B

-1.0%

Unit Sales

7.69 B

-4.3%

Price per Unit

$7.25

$0.24

Source: IRI, a Chicago-based research firm, U.S. Convenience Store All Scan Data for the 52 weeks ending Dec. 29, 2019

LEGISLATION CONTINUES

But turning 21 hasn’t extinguished the legislative spotlight on cigarettes. “As of the first week in February, there is a bill pending in the U.S. House of Representatives (HR 2339) that would ban the sale of all flavored tobacco products, including menthol cigarettes, nationwide,” said Thomas Briant, NATO executive director. “With state legislatures having begun their respective 2020 legislative sessions, additional states may also have bills introduced that would ban menthol cigarettes,” he added. Many in the c-store industry believe a prohibition on menthol would wield a bigger blow to cigarette sales than the age increase — IBISWorld reported menthol accounts for more than a quarter of cigarette wholesale transactions. Musser has seen how flavor bans dampen tobacco sales.“We have had a handful of unincorporated counties and towns ban flavored tobacco altogether. In those locations, we have slimmed down our backbar offerings,” she said. There’s also the perpetual possibility of cigarette tax increases. “So far this year, cigarette tax increases are being proposed in legislation in Georgia, Iowa, Maryland, Nebraska and Virginia. There could be additional state cigarette tax increase bills as more states convene their 2020 legislative sessions,” Briant warned.

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Tobacco | Roll-Your-Own

RYO TOBACCO DIPS

BUT SEES 2020 POTENTIAL Roll-your-own (RYO) tobacco has always been a niche segment under the broader label of other tobacco products (OTP). In recent years, some of its traditional demographic switched to more popular OTPs, such as e-cigarettes, vaping devices or nicotine-on-demand (NOD) pouches. Each of those has expanded in dollar and unit sales while RYO has contracted. Research from IRI shows RYO incurred losses of 6% in dollar sales from the convenience store channel for the 52 weeks ending Dec. 29, 2019. Unit sales for the same period experienced a 10.7% decline. That’s on top of a 9.9% decrease between 2018 and 2019. Plus, having the federal minimum purchase age for all tobacco products raised to 21, the RYO market share could take another hit. So, given the current conditions, Smoker Friendly Category Director of Tobacco and General Manager Tim Greene is pleased RYO sales have held firm in his stores. “(This year’s) outlook for the OTP category is strong,” he said. Smoker Friendly’s parent company, The Cigarette Store Corp., based in Boulder, Colo., operates more than 150 stores, including 22 newly acquired Tobacco Road sites. In addition to tobacco outlets and cigar lounges, the business runs Gasamat c-stores. “We

Rolling With the Times

An oft-overlooked OTP category, roll-your-own (RYO) tobacco products struggle in the current environment. C-Store Performance

Current

1-Year % Change

Dollar Sales

$42.0 M

-6.0%

Unit Sales

5.80 M

-10.7%

PIPE VS. RYO

Pipe tobacco dollar share at 65.25% is almost double that of roll-your-own (RYO) tobacco’s. RYO dollar share declined 1.06% in 2019. Dollar Share 1-Year % Change Pipe Tobacco

65.25%

1.06%

Roll Your Own Tobacco

34.72%

-1.06%

Source: IRI, a Chicago-based research firm, U.S. Convenience Store All Scan Data for the 52 weeks ending Dec. 29, 2019

CSTORE DECISIONS •

March 2020

expect smokeless, moist and NOD to continue positive growth, and we fully expect the RYO market to stay steady,” Greene said. GROWTH POSSIBILITIES

Indeed, this subcategory could be positioned for an upward shift. The global RYO market is expected to generate a compound annual growth rate (CAGR) of nearly 8%, according to multiple reports. At least part of that projected growth may be attributed to manufacturers trying to inject new life into rolling papers by featuring fruit and alcoholic beverage flavors. This could present an opportunity for retailers to alert consumers to OTP options in light of the ban on many flavored e-cigarettes and vaping devices. Then there’s the emerging field of legal cannabis, which is renewing interest in tobacco-related accessories such as rolling papers. “Rolling papers and other paraphernalia are already experiencing growth in markets where cannabis is legal. Whenever a new regulated cannabis market opens, the demand for all kinds of professional services and products in those areas increases, as does the demand for products and services geared toward the consumer,” said Morgan Fox, media relations director for the National Cannabis Industry Association. Although RYO tobacco and papers will likely remain a niche market in the overall OTP arena, at a total of nearly $42 million in c-store sales last year, per IRI data, it’s still a product sector that produces profit.

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Tobacco | Smokeless

DON’T SNOOZE ON SNUS There was a cavalcade of tobacco regulations last year, but 2020 started off on a more positive note for smokeless tobacco. When the Food and Drug Administration (FDA) released its guidance on flavored tobacco products in January, smokeless was notably absent. So when c-stores had to pull the majority of ecigarettes and vaping products from shelves last month, their vacancy created an opportunity for moist chew and the hot subcategory of nicotine-on-demand pouches (NOD). “I believe retailers are reevaluating the e-vapor category due to recent regulations. While all this is happening, they’re looking at their offering and thinking, ‘What do I do now?’ That leaves smokeless in the position to grow, especially with a more diverse category,” said Lou Maiellano, president of TAZ Marketing & Consulting. This other tobacco product (OTP) segment already has momentum, even though it represents only 8.1% of the U.S. market. “Our smokeless sales continue to improve. We see a better-than-normal increase during the months that we run a two-for deal on the cans,” said Sean Bumgarner, vice president for

Upward Sales for Snus

Although snuff continues to outsell, snus made big leaps in dollar and unit sales.

Chewing C-Store Performance Tobacco/Snuff

Spitless Tobacco

Dollar Sales

$7.1 B

1-Year % Change

3.9%

49.4%

Unit Sales

1.3 B

120 M

1-Year % Change

-1.6%

44%

$627 M

Source: IRI, a Chicago-based research firm, U.S. Convenience Store All Scan Data for the 52 weeks ending Dec. 29, 2019

Scrivener Oil Co., which owns and operates a dozen SIGNAL Food Stores throughout Missouri. Part of the success can be attributed to the rollout of NOD products, such as ZYN by Swedish Match. The company reported U.S. shipments totaled 31 million cans during the first three quarters of 2019. R.J. Reynolds Vapor Co. also introduced spit-free VELO last summer, offered in 70,000 retail sites. Although moist chew still outsells snus, the latter is making impressive strides. Per IRI data from the 52 weeks ending Dec. 29, 2019, spitless tobacco products tallied gains of nearly 50% compared to snuff’s 4% increase in dollar sales. Snus also jumped 44% in unit sales versus a loss of 1.6% for snuff. FLAVOR CONSIDERATIONS

However, the shadow of flavor bans still hovers. Cities across the country have imposed such restrictions, states legislators have proposed bans, with Massachusetts being the first to ban all flavored tobacco products, including mint and menthol. “I think (the statewide flavor ban including mint and menthol) will be impactful on smokeless tobacco. Smokeless is more than 90% mint and wintergreen, and all of the new innovations come out in different flavors,” said Anna Bettencourt, senior category manager for VERC Enterprises, which operates 33 locations in Massachusetts and New Hampshire. Still, for a large swath of the c-store industry, it’s an interesting environment for the smokeless OTP element. “It’s an alternative for folks who are looking to enjoy the satisfaction of nicotine,” said Maiellano. 70

CSTORE DECISIONS •

March 2020

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Tobacco | Cigars

CIGARILLOS STAND TALL IN CIGAR SEGMENT Cigars can be thought of in three basic categories: the small, filtertipped little cigars often sold in packs; the classic cigarillos; and traditional, large premium cigars. The first two categories comprise most c-store sets, and recent sales numbers have shown cigarillos to be the solid mover. Data management and analytics firm Management Science Associates (MSA), which tracks sales in about 400,000 retail sites across the U.S., found filtered cigars sales are down in every class of trade except for dollar stores — possibly because they’re so similar to cigarettes that state and local governments have begun to tax them more. Cigarette smokers who previously shifted to this segment may switch back to cigarettes given both the taxes on filtered cigars and a more robust economy. “Taxation levels have really influenced that little cigar, but (cigarillos) continue to be one of the real growth factors in the overall tobacco market,” said Don Burke, senior vice president at MSA. “The cigarillo market has really taken off and grown quite considerably, and it’s grown in practically every class of trade that we track.”

Cigars Keep It Steady

Cigars rolled on, remaining relatively flat in both dollars and units year-over-year. Dollar Sales

Unit Sales

Products

Current

1-Year % Change

Current

1-Year % Change

Cigarettes

$55.76 B

-1.0%

7.69 B

-4.3%

Cigars

$3.47 B

-0.2%

2.31 B

-1.3%

Other Combustible Tobacco

$121 M

-3.1%

15.9 M

-4.9%

Pipe Tobacco

$78.9 M

-1.5%

10.1 M

-1.3%

Roll-Your-Own Tobacco

$42.0 M

-6.0%

5.8 M

-10.7%

Source: IRI, a Chicago-based research firm, U.S. Convenience Store All Scan Data for the 52 weeks ending Dec. 29, 2019

STRONG & STEADY

cally. “There’s so much pre-priced While overall cigar unit sales have (product) out there that there leveled off — down 1.5% for 2019, isn’t much for margin with the according to Nielsen data ending increased volume,” Greene said. Nov. 23, 2019 — they’ve risen 8.3% “But the volume’s there, and we’re over the past four years, thanks to happy with the category.” 13.3% and 13.8% boosts in 2016 IRI data found the unit price for and 2017, respectively. 2018 saw cigars increased just two cents to those gains drop, but cigar dollar $1.50 in 2019. Overall, cigars are sales still rose a respectable 6.6%. holding steady and maintaining That recent dip in unit sales gains over the past few years. hasn’t fazed Tim Greene, category Currently, cigar makers are offerdirector of tobacco and gening heavy promotions, which Burke eral manager at Smoker Friendly, called, “a real bright spot” in the which operates 105 stores in category. Despite the unpredictfive states. Despite flat volume ability and rapidly changing landoverall in cigars, he’s seen inscape of the tobacco category, it creased volume for sticks, specifiseems cigarillos can offer stability.

Cigars four-Year Snapshot, 2016 to 2019

Cigars unit sales came in flat for 2019 after category-leading three-years growth clip, according to Nielsen data for total U.S. outlets combined.

Note: Data reflects inclusive view of UPC-coded and random-weight/non-UPC-coded items for all outlets EXCEPT for the convenience stores, where data includes UPC-coded items only.

Unit Sales % Change CAGR

CAGR

over four years

(compounded annual dollar growth rate)

(compounded annual unit growth rate)

52 weeks - ending 11/26/16

52 weeks - ending 11/25/17

52 weeks - ending 11/24/18

52 weeks - ending 11/23/19

8.3%

13.3%

13.8%

8.3%

-1.5%

6.6%

Source: Nielsen data for the 52 weeks ending Nov. 23, 2019, for all outlets combined, plus convenience stores

CSTORE DECISIONS •

March 2020

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Tobacco | E-Cigarettes & Vape

A NEW REALITY

FOR E-CIGS & VAPE In a way, the Food and Drug Administration’s (FDA) ban on flavored e-cigarettes and vaping ended in a compromise. As of Feb. 6, convenience stores and other retailers can no longer carry or display cartridge-based e-cigarettes or vaping pods in flavors other than menthol and tobacco. “Our wholesale supplier along with our individual brand representatives were very helpful in managing product inventory levels throughout the entire dialogue,” said Lisa Dell Alba, president and CEO of Bethlehem, Pa.-based Square One Markets Inc., which operates more than 10 c-stores in Pennsylvania. “We were able to keep product available until the deadline, allowing our eligible customers to purchase what they needed.” DISPOSABLES VS. ENDS

However, the FDA is allowing the continued sale of flavored disposable e-cigarettes that are completely self-contained as well as flavored e-liquids used in open vaping systems. According to The Wall Street Journal, disposables account for an estimated 3% of sales for all electronic nicotine delivery systems (ENDS). Examples include blu, STIG, Puff Bar and NJOY, which has voluntarily halted the distribution of fruit flavors.

ENDS Still Light Up Sales

Despite negative news and greater regulatory reach, c-store sales of electronic nicotine delivery systems delivered positive news in 2019. C-Store Performance

Current

1-Year % Change

Dollar Sales

$4.8 B

70.9%

Unit Sales

336 M

59.10%

Price per Unit

$14.40

$0.99

Source: IRI, a Chicago-based research firm, U.S. Convenience Store All Scan Data for the 52 weeks ending Dec. 29, 2019

CSTORE DECISIONS •

March 2020

“While we would have preferred there be no new flavor restrictions, in the end, we not only managed to protect open systems, but opened a vital dialogue with Health & Human Services officials about streamlining the FDA’s pre-market review process,” said Gregory Conley, president of the American Vaping Association. ENDS producers have until May 12 to submit a premarket tobacco application to seek FDA approval for future sales. In theory, if flavored cartridge- or pod-based ENDS gain approval, they could return to c-store shelves, though that’s yet to be determined, and decisions could be more than a year out. Another FDA concession was to abandon its earlier proposal of regulating ENDS to 21-only locations, or mandating c-stores create 21-only areas. The National Association of Convenience Stores (NACS) lobbied against this provision, claiming it favored certain retailer classes over others. “It would appear that the FDA heeded our concerns regarding a level playing field among retailers and adjusted their final guidance policy accordingly,” said Lyle Beckwith, NACS senior vice president of government relations. Like other tobacco products, though, ENDS still face resistance from lawmakers. “At the state level, we are likely to see flavor ban bills introduced in at least 25 states with Democrats attempting to paint the Trump Administration’s final policy as a gift to the e-cigarette industry,” said Conley. Indeed, last month Maryland’s comptroller announced a state ban on disposable e-cigarettes. Perhaps the best news is that the category finished 2019 with impressive totals: more than 70% in dollar sales growth and nearly a 60% jump in unit sales per IRI data.

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Tobacco | Accessories

TALLYING UP

TOBACCO ADD-ONS For most consumers, lighters, ashtrays, papers, matches and pipes may be impulse purchases, but for c-stores, they shouldn’t be an afterthought. Granted, tobacco accessories account for the smallest percentage of tobacco-related transactions, both in numbers and dollars, but each additional basket item offers a chance to boost profits with every tobacco sale. Even at an average price of $1.82 per unit, according to IRI research, this category offers a lot of potential. The Consumer Product Safety Commission estimates 1 billion lighters are sold each year. IRI reports U.S. c-stores sold nearly 155 million units of items considered tobacco accessories for the 52 weeks ending Dec. 29, 2019. However, as cigarette sales continue to fall year after year, accessories have also taken a hit. IRI data revealed the category’s unit sales dropped by 2% over the past year. Although lighter sales haven’t burned out for John Archer, who owns the Shell Food Mart in Hinsdale, Ill., he has seen a downtick since the state went to 21 minimum purchase age last July. “With the dip in cigarette sales, we’ve had a dip in lighter sales,” he said. For stores located in areas that incurred stricter tobacco regulations, the circumstances have delivered an even larger blow to the category. In Minnesota, many of the Bobby & Steve’s Auto World sites were forced to comply with local ordinances that dictated both tobacco retail pricing and product selection, which influenced sales of accessories.

Peripheral Players

As an impulse or point-of-sale purchase, tobacco accessories continue to ring up sales. C-Store Performance

Current

1-Year % Change

Dollar Sales

$281 M

-0.3%

Unit Sales

155 M

-2.0%

Source: IRI, a Chicago-based research firm, U.S. Convenience Store All Scan Data for the 52 weeks ending Dec. 29, 2019

CSTORE DECISIONS •

March 2020

“We saw a 15% decrease in lighter sales, but we were faced with a menthol ban in 40% of our stores,” said Madalena Ferreira Morgan, director of convenience store operations for Bobby & Steve’s Auto World, which operates eight c-stores in the Twin Cities region. “What I can offer becomes limited. For these locations, we focus on what we can offer and make sure we educate the consumer on other choices.” CANNABIS POTENTIAL

Still, the expanding market for legalized cannabis has ignited some fresh interest in tobacco-related accessories and other items associated with cannabis use. A 2019 BDS Analytics report stated global cannabis sales garnered $15 billion last year, with more than 80% coming from the U.S. Sales doubled last year in seven states, and adult-use purchases of cannabis products grew by 45%. The research firm also anticipates the market to grow by another 38% this year and potentially exceed $40 billion within four years. That offers serious potential for peripheral products, even if c-stores don’t officially enter the cannabis industry.

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CBD | CBD & Hemp

CBD & HEMP MARKET

CUTTING TRADITIONAL RETAIL’S WAY Cannabidiol (CBD) and hemp are trending in a big way in 2020, and their presence is expected to only grow bigger. The 2018 Farm Bill legalized the production of hemp when it removed hemp from the definition of marijuana in the Controlled Substances Act. Because CBD is found in hemp, it effectively legalized CBD at the federal level, opening the door to an entire new product category. But as CBD and hemp become mainstream, hurdles continue to appear. One big one is that consumers are still confused about the products. They remain uncertain about which manufacturers to trust and how CBD and hemp can help them. Retailers have a key opportunity to educate customers, allay concerns and introduce customers to quality products. VERC Enterprises is one c-store chain delving into the new CBD market at 33 locations in Massachusetts and New Hampshire. “We carry (CBD brand) Ceres Natural Remedies in all stores along with a few other brands,” said VERC Enterprises CEO Leo Vercollone.

Traditional Retail to drive CBD Sales Over the short- to medium-term, expect expansion across both pharmacy and grocery, as well as the emergence of supercenters, gyms, pet stores and other big-box retailers.

VERC will also be adding Ceres Natural Remediesbranded mini stores inside its c-stores, which will feature the brand’s CBD products and a few others, similar to how some c-stores feature quick-service restaurants within their stores. This will provide a central area within the store where people can talk to an employee who knows the products and can answer questions about CBD. Plus, there’s less overhead and better margins than foodservice, according to Vercollone. “It’s something that I think our industry, as we explore this, we really want to make sure that we partner with companies that are legitimate and that are testing their product, that are certified, that are regulated and are doing it right,” he said. 2020 OUTLOOK

Given the current chaotic legislative landscape, questions abound regarding which products are legal and in which states. Even so, the market is expected to keep steaming forward. “We project that the U.S. hemp-based CBD market could be a $2.25 billion to $2.75 billion industry in 2020,” according to Rich Maturo, an analyst for information and

Source: Brightfield Group

CSTORE DECISIONS •

March 2020

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CBD | CBD & Hemp

Pet owners & CBD Pet owners more likely to favor OTC sales of medical/therapeutic CBD products. Cannabis/Marijuana/Hemp Legalization Attitudes, 2019 (percent of pet owners by type of pet owned) Retail (over-the counter) cannabis/marijuana/ hemp/CBD products with medical/therapeutic benefits should be legal.

Source: Packaged Facts February/March 2019 Survey of Pet Owners

data ﬁrm Nielsen. “These conservative projections already account for hampered Food and Drug Administration (FDA) rulings and other possible speed bumps for the hemp-CBD marketplace.” An opportunity also exists in 2020 around the current chaos surrounding CBD. Brick-and-mortar retailers have an opportunity to educate consumers about products and uses. Traditional retail will drive the CBD market to nearly $25 billion within the next ﬁve years, accord-

1. 2. 3.

ing to CBD market research firm Brightfield Group. In its favor, both millennials and baby boomers are prime consumer demographics. A Consumer Reports study from 2019 found that of millennial users responding, 32% use CBD to reduce stress and anxiety. Of baby boomers, 42% use it to ease joint pain. Given the lax testing requirements in the marketplace, Consumer Reports advised retailers to ask for a certificate of analysis (COA) that proves the product contains what it says it does. That’ll go a long way in assuring customers. Also, consumers are going to want to touch the product. A great deal of that will come from personally speaking to retail representatives who know what they’re talking about. C-store operators should be ready to either train store associates in the CBD product line or bring in an outside company and its employees who already have the training. And don’t overlook the CBD market for pet care. The 2020 Pet Industry Green Paper from Nielsen and Headset reports 74% of CBD buyers own pets. All of these factors point to consumers favoring traditional retail.

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CSTORE DECISIONS •

March 2020

cstoredecisions.com

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2020

Technology | Loyalty

YOUR LOYALTY PROGRAM

SHOULD BE A CUSTOM FIT

Rewards programs: Every retailer should have one, right? Well, it’s a good idea. Just make sure it fits. “Loyalty programs should be viewed as one component of an overall digital marketing strategy,” said Ed Collupy, executive consultant with the firm W. Capra Consulting Group. “C-store retailers look to the competitive quick-service restaurant space to see how consumer digital experiences have come to life and how the consumer has reacted.” A strong number of consumers react positively to companies with loyalty rewards programs. Bond’s “The Loyalty Report 2019” found 79% of consumers are more likely to continue doing business with brands whose loyalty programs they’ve joined. Don’t be intimidated by the hype around the growing e-shopping trend, either. Purchases at brick-and-mortar stores still command the retail marketplace. That doesn’t mean convenience store operators don’t need to fine-tune their loyalty programs. They’d

Loyalty Influence and Satisfaction Among Younger Generations

Gen Z and young millennials are considered loyalty natives, having been involved in rewards programs since they first became consumers, according to Bond’s “The Loyalty Report 2019.” They are “highly influenced” by loyalty programs (62% Gen Z and 67% young millennials), but they are not as satisfied with the programs as they could be, providing an opportunity for retailers. Program Influence (Advocacy, Spend, Brand Choice) 62% 67%

Program Satisfaction (% Very Happy) 41% 44%

Gen Z (18-23)

Younger Milennials (24-29)

Source: Bond, The Loyalty Report 2019

CSTORE DECISIONS •

March 2020

Loyalty Shows Positive Momentum

The influence of loyalty programs continues to grow stronger year over year.

Consumer Action

% Who Agree

SAY: "I am more likely to recommend brands with good loyalty programs."

73%

STAY: "Programs make me more likely to continue doing business with brands."

79%

SPEND: "I modify my brand spend to maximize loyalty benefits."

66%

Source: Bond, The Loyalty Report 2019

be wise to continually adjust to consumer preferences and market changes. “Many c-store loyalty programs are aging and continue to rely on legacy c-store marketing practices like club programs and lengthy in-store merchandise promotions,” said Collupy. C-store retailers need to begin looking for new solutions. MOBILE REWARDS

For an example, look no further than Ankeny, Iowa-based Casey’s General Stores. The c-store chain introduced its mobile app before its rewards program — partly because the company wanted to begin taking mobile orders for its signature pizza and foodservice offerings, but also because Casey’s wanted to do the rewards element right. “The Casey’s Rewards program is really part of our larger digital engagement strategy,” said Darren Rebelez, president of Casey’s, echoing Collupy’s advice. Casey’s operates more than 2,200 stores across 16 states. The program extends beyond store dollars or fuel discounts. Casey’s Rewards gives members the additional option of donating their rewards benefits to their local school. The Cash for Classrooms program grew out of Casey’s unique vision of its place in each community it has a store. Rebelez explained that the program dovetails with the new company mindset, “Here for Good,” not only showing stability, but also the chain’s role as a neighborhood partner. Beware the cookie-cutter rewards program. Instead, a successful program should be tailored to your customer base and community profile.

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Technology | Prepaid

PREPAID CARDS’ POPULARITY CONTINUES TO INCREASE

Last year, the Consumer Financial Protection Bureau (CFPB) issued an update to the Electronic Fund Transfer Act that increases protections on prepaid accounts and governs them more similarly to checking accounts. These rules are helping fuel the continued growth of prepaid cards, both in open-loop cards for multiple items like bill pay or healthcare spending accounts and closed-loop cards that can only be used in one store or as part of a loyalty program. Their continued popularity as gifts is also helping drive the segment and making companies consider their own branded cards. “As the No. 1 most-requested gift by U.S. consumers, gift cards are really a customer expectation,” said Darek Mose, consumer card manager at Chevron. “That’s why we’ve expanded to the digital eGift card — to meet those expectations and help provide a better customer experience through mobile devices.” Mercator Advisory Group’s data shows that the amounts loaded on prepaid open-loop cards will continue to skyrocket. In 2012, $64.5 billion was loaded onto prepaid cards.That number is projected to be $132.2 billion in 2020 and $141.5 billion in 2021. And becoming more flexible and useful is helping continue the expansion. GENERAL PURPOSE RELOADABLE

“Prepaid cards will continue to grow through new innovations,” said Sue Brown, director, prepaid advisory service, Mercator Advisory Group. “A few features technology brought to prepaid cards include peer-to-peer payments, mobile remote deposit capture and robust mobile apps. There are several segments that are mature, like general purpose reloadable (GPR) 84

CSTORE DECISIONS •

March 2020

location of gift card display

When you have purchased from a gift card display at another retailer, which type(s) of store did you use? Supermarket/grocery

35%

34% 32% 36%

Pharmacy 26% 24% 26%

Specialty store

Convenenience store

Dollar store

64%

49% 46% 51%

Mass merchandiser

Wholesale club

51%

20% 21% 17%

35%

26% 23%

17% 20%

26%

Retailer-specific gift card General purpose nonrefundable gift card General purpose reloadable prepaid card

Source: Mercator Customer Monitor Survey Series, 2019 Payments Survey

and payroll. GPR cards are most frequently used as a substitute for a checking account, or as a means to control or budget spending.” Supermarkets still dominate the market, but Mercator’s survey of where people buy GPR cards and non-GPR cards showed that onequarter bought general purpose, non-reloadable gift cards at convenience stores and 23% bought GPR cards at c-stores. With so much convenience and so many usage options, the only limits to prepaid are how a customer wants to use them. “The best way to choose and use a prepaid card is based on each individual’s banking needs,” Brown said. “If you load cash, then choose a card with free loading. If you have direct deposit and need ATM access, choose one with free ATM withdrawals. Need to deposit checks, choose one with mobile remote deposit capture. Prepaid cards do not have to be a one-size-fits-all option.”

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Technology | Point-of-Sale

POS OPPORTUNITIES EXPAND In 2020, new point-of-sale (POS) solutions, including frictionless solutions, are giving c-store retailers much to consider. “Retailers continue to be confronted by POS solution providers’ attention to delivering software to support EuroPay, Mastercard and Visa (EMV) on the forecourt,” said Ed Collupy, executive consultant with W. Capra Consulting Group. “This, along with the earlier deployment of EMV for inside the store, has put a long delay in a shift of c-store/petro POS systems from legacy architecture and software features/functions that lag POS systems in competing retail channels.” POS suppliers, including start-ups and international providers, are gearing up to compete with POS leaders. “Although early for a solid alternative to be delivered, it’s clear that retailers are ready to listen and consider,” Collupy said. FRICTIONLESS PAYMENT

Self-checkout pilots and implementations are expected to continue in 2020, Collupy said, while more innovative retailers are experimenting with ‘scan and go’ and mobile apps with order- and payahead capabilities.

2020 POS/Customer Engagement Priorities 59%

1. Omni-Channel Capabilities/Integration

52%

2. Enhance Current POS

44%

3. Unified or Single Commerce Platform

44%

4. Mobile POS

41%

5. Upgrade/Replace POS

In 2019, High’s introduced the SKIP frictionless checkout app to 40 of its 49 locations in Maryland. “2019 was the start of our ‘digital reboot,’” said Noah Sanders, senior implementation and analytics manager for Baltimore-based High’s. “SKIP played a key first step in showing not only is High’s catching up with key pieces of retail technology, but a commitment to leading the way.” The chain wanted to be first in its market to offer frictionless checkout to capture early adopters of the technology, while rolling out additional programs. “We had several pieces we added or upgraded in 2019, including our new-and-improved High’s Rewards Program + Carroll Pay, mobile application, website, in-store foodservice touchscreen ordering,” Sanders said. High’s plans to add SKIP to all stores. It is upgrading internet bandwidth at some rural locations to accommodate the program. Sanders noted customers seem increasingly comfortable with mobile payment given growing exposure to mobile devices and online shopping, and risk of skimming and data breaches with credit cards. “Our customers have had the ability to use ‘contactless payments’ such as Apple Pay, Google Pay or Samsung Pay for quite some time, and we see more and more usage of this daily,” he said. Collupy concurred. “Progressive retailers are taking a view that any consumer touchpoint be viewed as a place where traditionally a POS device and/or software was needed to transact,” he said. “Beyond the mobile device consumers walk in the store with, consider kiosks, the fuel dispenser, a connected car or toll device, smart speakers or even the good old website.” BACK OFFICE

Source: Retail Consulting Partners’ “2020 POS/Customer Engagement Survey”

Today, stores feature more hardware and software, and retailers are ensuring sites are secured from potential breaches through any one entry point, Collupy said. “In my mind, no matter what technology is being considered or deployed, consideration around how data will be put to use by a retailer must be paramount.”

cstoredecisions.com

March 2020 •

CSTORE DECISIONS

Technology | Security & Cash Management

CASH SECURITY IS STORE SECURITY Store security generally focuses on avoiding theft, robbery and shrinkage. One potentially overlooked but important way to keep your store, customers and employees safe is to keep your cash safe. One way to do that is to secure the cash with a smart safe that keeps you connected to your money, while keeping employees safe. “Smart safes have the capability to maintain an accurate account of the cash on hand, complete the end-ofday accounting process, initiate an armored truck pick-up and provide added security around overall cash handling for employees,” said Sean Sportun, manager of security and loss prevention for Circle K Central Canada. “The entire process has made it easier for operations to control cash losses, but most importantly, it is making the overall store environment safer for employees and customers.” LOSS PREVENTION MINDSET

A 2018 National Retail Foundation (NRF) Security Survey showed that the top ﬁve loss prevention systems include burglar alarms, CCTV monitoring, armored car deposit pickups, digital video recording and

Source of inventory shrinkage (2018 Average) Shoplifting/external (Incl. ORC) 35.7%

33.2%

Employee theft/internal

Administrative and 18.8% paperwork error Vendor fraud or error

5.8%

Unknown loss

6.6%

Source: 2018 National Retail Security Survey 0

10 15 20 25 30 35 40

CSTORE DECISIONS •

March 2020

POS data mining. These and newer means like artiﬁcial intelligence that can identify risk areas are helpful. But building in cash security measures is also vital. “If you’re loading cash, you don’t want to be loading it by yourself. You want to have someone else there standing by watching the surroundings,” said David Tente, executive director of the ATM Industry Association. “Some things people are starting to do include putting GPS trackers into ATMs ... If they do steal the whole ATM, it doesn’t take too long to get into the safe. There are ink staining devices you can put on the cash cassette, so if someone tries to remove the cassette without disarming it, it will activate and stain one-third of each note.” Many ATM owners and service providers also have apps, alarms or sensors that can be installed on the ATM. And while mobile phones and cardless technology may eventually wean people off of cash, those days are far in the future. So ensuring your cash policies are strong enough to protect your store, customers and employees is of the utmost urgency. “It really comes down to the organization’s cashhandling policies and procedures and the train-

LP Team Growth Compared with last year, are your loss prevention (LP) teams in 2018 growing, decreasing or remaining the same in regard to the number of employees? 7.9%

Decreasing significantly

3.2%

Growing significantly

11.1%

Decreasing somewhat

33.3%

Growing somewhat

44.4%

Remaing flat

Source: 2018 National Retail Security Survey

ing provided to the employees,” Sportun said. “Every cash-handling policy should have a set minimum amount of cash on hand, when to make a cash drop and restrictions around safe access.”

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Technology | Electronic Payments

ELECTRONIC PAYMENTS EVOLVE Mobile wallets and use of mobile apps are expected to grow in 2020 as customers set expectations with retailers. “One of our recent customer surveys indicated that there is still a large gap in checkout expectations across consumer age brackets,” said Perry Kramer, managing partner at consulting firm Retail Consulting Partners. Of customers ages 18-37, 65% said a mobile app or wallet for checkout would influence the store they shopped at, while only 33% for those ages 37 and older agreed. Kramer noted retailers today are investing in new payment technologies that support contactless payments. “Specific to the c-store space, we have seen a slower investment in the development of mobile wallets and mobile apps that support payments,” he said. “This can often result in a disjointed experience if the c-store has a franchise like a Dunkin’ Donuts in it that has a powerful mobile wallet that speeds checkout, and then that same customer has to stand in line at the c-store register under the same four walls and have a slower legacy experience.” In 2020, Retail Consulting Partners sees increased movement toward self-service features, including order-ahead online or inapp, or via in-store kiosks. PAYMENT EVOLUTION

The rise of frictionless checkout is expected to be significant across retail channels. C-stores have higher-than-average in-store percentage of cash sales, Kramer noted, which makes it more challenging to achieve a return on investment on improvements made to the payment experience in a reasonable time. “We are seeing retailers that have any type of orderahead services or loyalty rewards being the earlier adopter of mobile wallets and mobile apps that support payments.” Mike Fogarty, owner of Denver-based Choice Market, with two locations and two more set to open this year in Colorado, is embarking on a 88

CSTORE DECISIONS •

March 2020

Alternative Payment Types

Retail Consulting Partners’ “2020 POS/Customer Engagement Survey” found that, across all retail segments, Apple Pay, Android Pay, PayPal and Visa Checkout were the only mobile wallets more than 50% of retailers had implemented or had plans to implement within two years. Accept within 2 years

Currently accept

Apple Pay

Wait to see approach

63%

Android Pay

44%

PayPal

44%

37% 19%

30%

Visa Checkout

Private (Retail Branded) Closed Loop Payments

15%

Mastercard Paypass

63%

11%

67%

15%

70%

WeChat Pay 8% 11%

81%

Alipay 8% 7%

85%

Cryptocurrency 4% 7%

89%

(Biotin, Etc. )

19%

44%

11%

22%

11%

37%

26%

Samsung Pay NFC

26%

Source: Retail Consulting Partners’ “2020 POS/Customer Engagement Survey”

100

full digital transformation of the c-store chain’s app, e-commerce website and in-store kiosk that will feature a unified omnichannel experience, launching with the opening of its third location this spring. “In our current stores, we do online ordering — you’re able to order ahead, you’re able to order delivery, but it’s all different systems and it’s very disparate. We want one unified customer experience,” Fogarty said. As a part of this omnichannel experience, Choice Market has partnered with a strategic tech partner to help guide its path toward incorporating such technologies as vending machines, unattended micro markets and even “full-vision self-checkout.” “With frictionless, as people know, it’s quite costly, and you just have to make sure it’s a good fit,” Fogarty said, adding, for Choice, it offers problem-solving capabilities because many of its products — from produce to bagels and coffee — don’t have barcodes. Allowing customers to check-in and let cameras track the rest would be convenient, he said.

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Operations | Car Wash

QUALITY RULES CAR WASH As attitudes about the environment changed, so did attitudes about car washes. But not in the way you may think. “We’ve been in the car wash industry since 1974, and I think our biggest competition then was people washing in the driveway,” said Paul Vercollone, senior vice president of VERC Enterprises, which operates 33 c-stores and seven car washes in the Northeast. “Perception has changed, and people look at the water used in driveways as much more than what is used in professional car washes.” Water conservation technology alleviated concerns about chemicals in the soil and water. Other enhancements like more car-friendly brushes, soaps and waxes, softer cloths and high-pressure washing systems have helped remove worry about possible damage. And multiple options for how, when and where to wash have brought stability. “The convenience of a car wash is more

Car Wash Revenue in 2019

Over the five years to 2019, car wash revenue was anticipated to grow at an annualized rate of 4% to $12.3 billion, including an anticipated 2.9% increase in 2019, according to market research firm IBISWorld’s, “Car Wash - Auto Detailing in the US Industry Report.” Below is a breakdown of percentage of revenue. 6.1% Hand-washing service

PROMOTIONS DRIVE SALES

11.3%

Self-service bay

13.1%

Detailing services

25.2%

Exterior-only clean

(conveyor car washes)

24.3% 20% Full-service clean

In-bay automatic car washes

(conveyor car washes)

Source: IBISWorld’s “Car Wash - Auto Detailing in the US Industry Report”

popular than ever,” said Joseph Chatel, president of the Midwest Carwash Association. “Cars are more complex now, but so is the washing technology and more care is taken across the board to increase things such as efficiency, sustainability and customer service,” Chatel added. Large tunnel conveyor washes still comprise nearly half of industry revenue, according to IBISWorld, but in-bay automatic washes (20%) and self-service bays (11%) are growing. Those options mean flexibility in location and options in an industry lacking in space and trending toward speed and convenience like touchless and express washing. “The old model of a car wash at a gas station is disappearing and moving heavily toward a standalone facility to accommodate the newest technology in washing,” Chatel said. “Traditional services can be offered quite easily while adjusting to market trends in more frequent express washing.”

CSTORE DECISIONS •

March 2020

To do so, many car washes are turning toward discounts and incentives to draw customers. “To bring them in, everyone is running some sort of promotion,” Vercollone said. “A lot of tunnels are doing unlimited plans where you pay a monthly fee. But you do need to produce a clean car. They’re not going to return if you’re producing a vehicle that’s substandard.” Still, car washes remain popular for one good reason. “There will never be a shortage of dirty cars in the world,” Chatel said. “This means the industry can continue to thrive and become one that remains at the forefront of automobile maintenance.”

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Operations | Fuel & Fuel Alternatives

ELECTRIC VEHICLES GROWING, BUT THEY’RE JUST PART OF THE FUEL MIX With the rise of electric vehicles (EVs), the buzz around fuel retail has lately centered around installing electric charging stations. But with increasing choices like biofuels, hydrogen battery propulsion and more efficient fossil fuels, it’s going to be a while before electric is the standard. While more carmakers are introducing electric versions of more of their standard models, what they aren’t saying is what portion of each model production will be electric. It won’t be many. It’s going to take some time for the EV market to grow enough to have a significant impact for c-stores and their fuel sales operations. “Even if we converted every single vehicle sold today and every vehicle after that with the electric, it’s going to take more than nine years to convert half of the fleet,” said John Eichberger, president of The Fuels Institute. According to Market Research study “Are EVs Equipped Enough to Overthrow the Dominance of Vehicles Based in ICE?” Toyota, General Motors and Volvo are aiming to sell one million EVs by 2025. Others have set ambitious goals, too. Make no mistake, the number of EVs will increase year after year. The key players in the auto industry are setting targets for EV production, according to ambitious electric targets, as well. “And so the industry has to really start thinking about how to position itself to become less reliant on fuel and more of a destination for drivers who don’t need energy as often,” Eichberger said. 92

CSTORE DECISIONS •

March 2020

PLANNING AHEAD

That means fuel retailers need to do some contingency planning now to be ready to adjust down the road. “We’ve made a pivot to being a food-first company,” said Jeff Bush, president of Parker’s, which operates 64 stores in Georgia and South Carolina, “and now what we’re doing is expanding that offer as the energy landscape changes, as well.” Pay attention to what your customers are driving and what your neighbor stations are offering. “So maybe today that’s sandwiches and fresh fried chicken and chicken tenders and combustible fuels,” Bush added, “and maybe in the future that’s coffee and Wi-Fi and a gym and electric vehicles.” While EVs seem to be the wave of the future, keeping the right mix of high-octane, more efficient fuels and even biofuels will be key to maximizing fuel sales.

Adoption of electric vehicles: target vs. trends

Source: BIS Research Analysis

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

CStoreDecisions .com Making Connections that Drive Business

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Operations | Lighting

MONEY-SAVING LEDS

EARN THEIR KEEP “For new construction, LED lighting has become the standard for the c-store industry and the retail industry in general,” said Niki DePhillips, senior vice president of store development for Kum & Go, which operates more than 400 stores across 11 states. “Kum & Go utilizes LED fixtures in all interior and exterior fixtures.” Even when retrofitting fixtures at existing locations, she said, the return on investment makes LED technology a good choice. Above and beyond the energy savings, their solid-state construction means they don’t have to be changed — reducing maintenance costs and slip-and-fall mishaps. “It’s cheaper, safer,” said Jason Nordin, chief operator for Pilot Company, which plans to complete retrofitting every one of its more than 750 stores in North America by the end of 2021.

LED Lighting Saves Dollars • By 2035, LED lighting is expected to comprise 84% of all lighting installations, enabling 62 quads* of cumulative energy savings, according to the U.S. Department of Energy (DOE). • If DOE targets for efficiency and controls/ connected lighting are met, LEDs will bring an additional 16 quads of energy savings (for a total of 78 quads) through 2035. • One quad is equal to 293 billion kWh. • World energy consumption was estimated at 524 quads. • The total cumulative energy savings of 78 quads is equivalent to around $890 billion in avoided energy costs. *A quad is defined as a convenient unit for describing national and world energy resources. Source: U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, www.energy.gov/eere/ssl/ssl-forecast-report

CSTORE DECISIONS •

March 2020

ENERGY MANAGEMENT

Pilot is also installing an energy management system with the LED packages. “So, you can monitor what’s going on inside the store,” Nordin said. “If a store is pulling too much on the HVAC system … you can send alerts that say something’s wrong in your store. You then want to go check it out.” Opportunities to save on energy can be found around every corner in a c-store. For example, daylight harvesting strategies automatically dim the LED fixtures near exterior windows and on exterior units. “Kum & Go uses multiple lighting control strategies in combination with LED technology,” DePhillips said. “Wall- or ceiling-mounted dual-technology occupancy sensors are installed in all Kum & Go restrooms, walk-in coolers and freezers and backrooms.” But energy-efficient lighting systems have now gone beyond saving money and entered the realm of making money — in the form of increased sales. “The most exciting innovation to look forward to is smart lighting technology,” according to DePhillips. “With the individual control flexibility, in-store presentation can be enhanced to influence shopping behavior by creating product focus.” Crossover technologies also integrate sensors that alert when shelves need stocking. According to the “Perfecting In-store Execution” report by retail consultant Trax, only 17% of retailers now use similar technology. Large chain or small store, LED lighting and energy management systems will continue to lift the c-store bottom line.

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Operations | ATMs

ATMS MUST KEEP PACE WITH TECHNOLOGY While ATMs are a visible, popular part of a c-store, their operating model hasn’t changed much: Customers come in, pay a fee and get cash. And because fees have traditionally stayed at a consistent level, ATMs remain a popular investment for c-stores and attraction for customers. But as cash’s popularity lessens, ATMs will need to evolve. “The need for cash is strong, but we are mindful of the future and the emergence of digital transactions, and we want to make sure our ATMs work well with mobile phones,” said Bruce Renard, president of the National ATM Council. “With Venmo and those types of services, the payment landscape is changing, and we have to be mindful of technology-based changes and make sure we’re meeting people’s needs.” Owners should look at what technology will bring in the next generation of customers so that ATMs remain a good investment and attract customers. “ATMs are predominantly single-use items,” said Adam Sturdivant, vice president of strategic planning and development at The Kent Cos., which operates more than 40 Kent Kwik c-stores in three states. “Over the next few years, that will likely shift to more multi-use machines. ATMs that perform more bank transactions including deposits, check cashing functions, coin redemption, gift card purchase or bill pay may all be available in the near future.” Currently, it’s access that makes them popular, especially in under-banked areas. But providing new reasons to come into the store and use the machine will soon become vital.

5Facts on ATMs

• There are approximately 470,135 ATMs in the U.S., with 191,741 bank-owned and 278,394 independent. • The largest non-bank ATM provider in the U.S. is Cardtronics, with in excess of 100,000 ATMs deployed in America. • The second largest U.S. independent ATM provider is Payment Alliance International, with over 70,000 ATMs in service. • More than two-thirds of ATMs in the U.S. are deployed in various retail locations. • Among the 470,135 ATMs across the nation, 278,394 are independent ATMs, accounting for 59.2% of all ATMs. Source: National ATM Council, “2018 Locational Study of ATMs in the US by Ownership”

UPGRADING TECHNOLOGY

A first step is syncing the mobile phone and the ATM. ATM companies are already introducing the ability to use the ATM by tapping a radio frequency-enabled (RFID) card or by scanning an app. While those are mostly at banks, adding them to convenience stores will increase usage and return on investment for store owners. “We’re beginning to see new products and services offered at ATMs,” Renard said. “As ATM architecture becomes more software-based, we can make functionality more app-based, similar to the smartphone, and have it be more open-source, where developers can write programs that can be used on ATMs.” Future enhancements could include biometric authentication, smart safes and cash recycling to help reduce skimming, fraud and theft. But a good first step would be to increase use of ATMs that can handle cardless transactions. “Cardless transactions are available now at many retail locations, including fuel pumps,” Sturdivant said. “It seems only natural that ATMs will adopt some form of these transactions.”

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March 2020 •

CSTORE DECISIONS

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The Coca-Cola Co.

www.coca-colacompany.com

Natural Cone Leaf Wraps Legal Lean has a new offering: its organic cone leaf wrap. Legal Lean offers its consumers a nontobacco ‘better-for-you’ (BFY) option that can still be used to fill herbal smoke blends. Its leaf wraps are made from a bidi leaf, which is native of India. Its leaves are organic, hand-rolled and contain no tobacco or other carcinogens. Legal Lean’s cones are extra slow burning and help to maintain a nice flavor and pleasurable experience. They come in grape and natural flavors. They also come in two sizes: the minis (88 millimeter) and the king size (120 millimeter) with three- and five-pack varieties.

Legal Lean Co.

(408) 883-5326 • legalleanstore@gmail.com

www.legalleanstore.com • www.legallean.com

Chicken Alfredo Pizza Hunt Brothers Pizza has unveiled its newest limited-time offer (LTO), Chicken Alfredo Pizza, available this spring. Chicken Alfredo Pizza satisﬁes cravings by combining the familiar creamy alfredo ﬂavor with a food people know and love: pizza. Chicken Alfredo Pizza features Hunt Brothers Pizza’s original crust, topped with a creamy alfredo sauce, a blend of 100% natural part-skim mozzarella, natural white cheddar and aged Asiago cheeses, and all-natural chicken breast. Chicken Alfredo Pizza will be available to Hunt Brothers Pizza store partners beginning April 27 while supplies last.

Wind-Resistant Lighter Calico Brands Inc. has introduced the BBQ Pit Boys Torch Flame Wind Resistant lighter by Scripto. The lighter features a patented torch ﬂame that lights and stays lit in windy conditions, perfect for tackling challenging outdoor lighting situations. It’s available in three colors — red, yellow and black — and features the BBQ Pit Boys packaging and logo imprint. The BBQ Pit Boys Torch Flame Wind Resistant lighter by Scripto is available in a single pack with a manufacturers’ suggested retail price (SRP) of $7.99. This lighter is also available in a variety of display vehicles such as a ﬂoor display, clip strip, counter display and open stock.

Calico Brands Inc. (800) 544-4837 marketing@calicobrands.com

www.calicobrands.com

Hunt Brothers Pizza

www.huntbrotherspizza.com 96

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March 2020

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PRODUCTShowcase

Almond Milk Creamer Blue Diamond Almond Breeze has introduced a brand-new dairy-free coffee creamer — Sweet Crème Almondmilk Creamer. Almond Breeze’s third dairy-free creamer following its Vanilla and Unsweetened Original ﬂavors, Sweet Crème is a delicious ﬂavor with a hint of vanilla and just the right amount of sweetness. It mixes in perfectly with coffee and doesn’t curdle, and it’s a perfect alternative to dairy and other plant-based creamers at only 15 calories per serving. The suggested retail price (SRP) is $3.99.

Blue Diamond

www.bluediamond.com

Powerful Induction Ranges The Vollrath Co.’s new 4-Series Countertop Induction Ranges match or exceed the performance of gas ranges in all key aspects. Temperature control is more accurate, while time to boil is 28% faster than gas and 19% faster than competitive induction ranges. The 4-Series ranges offer an expanded magnetic ﬁeld, smarter pan detection technology, along with a temperature control probe on some models. It’s easy to program cooking sequences, and each range is equipped with patented circuitry that delivers steady, unparalleled power. The enhancements add to all the beneﬁts chefs already love about the technology while also being easy to use and maintain.

Vollrath Foodservice www.vollrath.com

Natural Leaf Cigarillo Optimo Cigars, a Swisher brand, continues its tradition of innovation with Optimo Cognac, a limited-edition blend that combines the rich aroma of Cognac complemented with notes of honey. This popular blend offers a smooth smoke with an elegant finish that is encased in first-class natural leaf wrappers and delivers a one-of-a-kind smoking experience. This in-demand limited-edition won’t be around for long but is available in a variety of market-driven price points to maximize sales and profits.

Swisher International

(800) 874-9720

www.swisher.com

Zero-Sugar, Kid-Sized Beverage Zevia has released Zevia Kidz — a new zero-sugar, naturally sweetened, lightly fizzy beverage line for kids. Now Zevia offers drink choices for the whole family with this delicious line offered in four kid-friendly flavors: Fruit Punch, Orange Cream, Fizzy Apple and Strawberry Lemonade. Zevia Kidz come in kid-sized cans with classic Disney characters and feature the Disney Check, which helps families easily identify better-for-you choices. In addition, the beverages are Non-GMO Project Verified, gluten free and caffeine free.

Zevia

www.zevia.com cstoredecisions.com

March 2020 • CSTORE DECISIONS

PRODUCTShowcase

Sugar-Free Soda MTN DEW introduces MTN DEW Zero Sugar, a new product that offers all the bold charge and ﬂavor of the original MTN DEW, now without any sugar. MTN DEW Zero Sugar is the answer for adventurous consumers looking for less sugar and more action. Curated for those who thrive on the thrill of putting their passion into action, the marquee addition to the PepsiCo portfolio is just as good as the original — and maybe even better. MTN DEW Zero Sugar is available in 20-ounce bottles, two-liter bottles, 12-packs of 12-ounce cans and a variety of other single and multipack sizes.

PepsiCo

Everything Bagel Snack

www.pepsico.com

Bada Bean Bada Boom’s Everything Bagel bean snack captures the taste of a freshly baked New York bagel with garlic, onion, sesame seeds, poppy seeds and a pinch of salt in every bite. Everything Bagel is available in one-ounce single-serving (SRP $1.99) and three-ounce resealable snack bags (SRP $3.99). Bada Bean snacks are roasted broad bean snacks made with simple ingredients: broad beans (also known as fava beans), a touch of sunﬂower oil and seasonings. The brand is 100% vegan, gluten-free and nonGMO. Each one-ounce serving packs six to seven grams of plant-based protein and three to four grams of ﬁber.

RTD Cold-Brew Coffee As functional coffee continues to dominate headlines, STōK Fueled Cold Brew is the ideal choice for consumers who are looking for more from their coffee but aren’t willing to sacriﬁce great taste or convenience. Offering a delicious, creamy taste, STōK Fueled Cold Brew Ready-to-Drink Unsweet Coffee provides caffeine for quick-start energy, along with 10 grams of protein, ﬁve grams of MCT oil, fat from butter and no added sugars. STōK Fueled Cold Brew is also a keto-friendly coffee option.

Danone North America

Bada Bean Bada Boom

www.danonenorthamerica.com

www.badabeansnacks.com

Sourdough Doughnut Mix Dawn Foods’ Sourdough Donut Mix is a mashup of sourdough bread and a yeast-raised doughnut that creates a buttery sourdough ﬂavor with a soft, light and airy texture for a deliciously unique doughnut experience. Following on Dawn’s 100-year legacy, this versatile doughnut mix allows for a wide array of unique, on-trend offerings to help grow a business and stand out among the competition. The mix can be used in both sweet and savory offerings, providing versatility and myriad ways to innovate menu offerings.

Dawn Food Products Inc.

www.dawnfoods.com 98

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cstoredecisions.com

PRODUCTShowcase

Keto Ice Cream Halo Top introduced a new Keto Series with seven flavors: Peanut Butter Chocolate, Caramel Butter Pecan, Chocolate Cheesecake, Jelly Donut, Berry Swirl, Banana Cream Pie and White Chocolaty Macadamia Nut. These delicious desserts are made with creamy, ultra-filtered skim milk, which delivers fewer calories than regular milk and a good source of protein, addressing a broad range of consumer dietary needs, including those following a keto lifestyle. The Keto Series flavors have net carbs ranging from five to 10 grams and calories range from 410-630. The suggested retail price (SRP) is $5.99.

Dipped Almond Flavors

Halo Top

www.halotop.com

Bottled Iced Teas TAZO recently launched an exciting new lineup of bottled iced teas featuring three of TAZO’s most popular signature flavors: Zen, Awake and Passion. The teas are available in 12-ounce singleserve bottles for a suggested retail price (SRP) of $1.99 and 42-ounce multi-serve bottles for $3.79. The teas have 20% less sugar than other TAZO ready-to-drink (RTD) blends, contain no artificial colors or sweeteners and are Certified USDA Organic.

TAZO

www.tazo.com

Beef Stick Flavors The Jalapeño and Teriyaki 15-ounce Deli-Style Beef Sticks are the newest taste temptations to accommodate Old Trapper’s hungriest fans. The new Teriyaki flavor combines the delicious spice of Old Trapper’s famous smoked beef with the tangy flavor of soy sauce. The Jalapeño Deli-Style Beef Sticks start with the same wood-fired smoked beef with the added bonus of jalapeño spiciness. Each 15-ounce bag of Old Trapper Deli-Style Beef Sticks retails for around $14. Each serving of both new flavors contains only two grams of total carbohydrates and nine grams of protein, making them a keto-friendly snack.

SkinnyDipped Almonds launched two new flavors: Super Dark + Sea Salt and Lemon Bliss. Like all SkinnyDipped products, the new flavors start with whole almonds dipped in a thin layer of ethically sourced artisan dark chocolate or creamy, rich, non-GMO yogurt then finished with a dusting of perfectly paired ingredients. All products are Non-GMO Project Verified, gluten free and contain no artificial colors or flavors. All SkinnyDipped Almonds are sold in 3.5-ounce pouches for a suggested retail price (SRP) of $4.49 and, in existing flavors, 1.5-ounce singleserve bags for $1.99.

SkinnyDipped Almonds

www.skinnydipped.com

Old Trapper Smoked Products Inc.

www.oldtrapper.com

cstoredecisions.com

March 2020 • CSTORE DECISIONS

Classifieds/Ad Index Apter Industries

Inline Plastics

Calico Brands

ITG Brands

CB Distributors

5,7

JUUL

Cheyenne International, LLC

Krispy Krunchy

Click It

Crown Imports

E-Alternative Solutions

800.441.7146 / www.apterindustries.com

Perfetti Van Melle

103

Prairie City Bakery

Premier Manufacturing

Republic Tobacco

Legal Lean

Shamrock Farms

Liggett Vector Brands

Smokey Mountain Snuff

Little Debbie

Solari Hemp

Loomis

Swedish Match

McLane Company

800.544.4837 / www.calicobrands.com 888.824.3256 / www.cbprices.com 866.254.6975 / www.TopCigar2020.com www.clickitinc.com

www.handfamilycompanies.com/crown-imports 877.373.0069 / www.Ealternativesolutions.com

5-hour Energy

26-27

866.960.1700 / www.5hourenergy.com/trade100

Gulfcoast

727.449.2296 / www.gulfcoast.com

www.inlineplastics.com/reborn www.itgbrands.com www.juul.com 800.290.6097 / www.krispykrunchy.com 408.883.5326 / www.legalleanstore.com 877.415.4100

800.315.6208 / www.LittleDebbieCStore.com www.loomis.us/SafePoint www.mclaneco.com/cci

Hershey

Mondelez International

Home Market Foods

800.367.8325 / www.HomeMarketFoods.com

The NAMA Show 2020

www.thenameshow.org

Hunt Brothers Pizza

North American Bancard

www.HersheySolutions.com

800.453.3675 / www.huntbrotherspizza.com/csd

IDDBA 2020

www.IDDBA.org

www.mondelezgrowthprogram.com

866.481.4604 / www.nynab.com

NRF Protect 2020

www.nrfprotect.com/freeexpo

100 14

800.283.5988

www.pcbakery.com

800.272.8656 / www.manitou.us.com 800.288.8888

612.259.8848 / www.rockinprotein.com www.SmokeyMountainSales.com 888.384.7333 / www.solarihemp.com 800.367.3677 www.gamecigars.com www.generalsnus.com www.swedishmatch.com www.zyn.com

39 45 73 9

Swisher International

19,104

800.874.9720 / www.swisher.com

U.S. Smokeless Tobacco Co. Werner Meat Snacks

800.459.6420 / www.WernerJerky.com

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March 2020 â&#x20AC;¢ CSTORE DECISIONS

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IndustryPerspective

What’s Ahead for CBD Sales? CBD sales boost likely as consumers expect more brick-and-mortar outlets to carry edibles, topicals. Don Burke • MSA

Cannabis drove human herbal medicine for 4,000 years, and today, cannabidiol (CBD) is the primary cannabinoid associated with wellness, and anxiety and stress relief. With this level of history, you would think CBD would be a well-accepted remedy today; however, in 1970 cannabis was erroneously classified as a Schedule 1 drug — a move that prevented consumers from experiencing the benefits of CBD. Then, in December 2018, the Farm Bill passed at the federal level, legalizing CBD from hemp for over-the-counter use. Consumers quickly responded to this news and made CBD one of the fastest growing new consumer products. Since the passing of the Farm Bill, Management Science Associates (MSA) has been tracking Google CBD search trends. The search level peaked around mid-year 2019, and significantly declined since that time. As consumers often search prior to purchasing, this suggests a possible recent decline in CBD consumer purchase intent, and we believe the tetrahydrocannabinol (THC) vaping crisis — where numerous deaths were reportedly linked to vaping THC — could be to blame. It appears negative publicity generated by incomplete and misleading information on the THC vaping crisis caused consumers to become cautious about purchasing new, unfamiliar products. Do you agree or disagree with this perspective? Email Executive Editor Erin Del Conte, edelconte@wtwhmedia.com.

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This has affected sales of CBD vaping items but seems to have also cast a, likely temporary, negative sales effect across CBD products as a whole. MSA’s Consumer Research Around Cannabis data shows consumer attitudes toward cannabis and CBD remain positive, with nearly 67% of the 83,000 adults responding to this research showing they would approve of either medicinal or recreational use. Further analysis shows the target audience for CBD items tends to be younger consumers of both genders with above-average income levels, and CBD users are two- to threetimes more likely to use tobacco than the general population. This is encouraging news for retailers with the tobacco consumer as a shopper. C-STORE FOOTHOLD

Today, c-stores are the fourth most popular place to purchase CBD, capturing 22% of consumers. The most popular choice for purchase is online (29%). This is similar to how the vapor category grew, with consumers initially choosing to purchase online, when the product category was in its infancy, and then progressing to brick-and-mortar purchases as the category and their product knowledge and experience developed. The best-selling CBD item in c-stores today is the gummy, holding a 27% dollar share of total CBD convenience sales. This is closely followed by tinctures — liquids typically placed under the tongue for quick absorption — with a 22% dollar share. Then it gets interesting. CBD vape items, prior to the THC vaping scare, were the No. 3 item but have fallen

to fourth place behind CBD topicals. Previously, CBD vaping items had a 21% share of the category but fell to a 12% share later in 2019. Most recently, it appears that the THC vaping crisis, which started in mid-2019, may have slowed consumer enthusiasm for the entire CBD line of products. By the third quarter of 2019, the InfoMetrics data, which measures distributor shipments into c-stores, was starting to show weakness in the gummies, vape and tinctures product forms. The most recent fourth-quarter results show declining distributor shipments across all CBD product forms; it was early in this quarter when the THC vaping crisis peaked. This decline in shipment data could be an indication that retailers are just ordering less often because of slower consumer demand but that consumer purchases are still growing, albeit not at the same rate as they were earlier in 2019. There is likely, however, an upside on the horizon. Sales of CBD can be expected to improve with greater consumer understanding that the THC vape crisis was caused by illicit products, and as the general body of knowledge on CBD continues to increase. Convenience retailers will likely recall a similar slow-down in the sales of vapor items in 2015, only to be followed by a period of robust growth in the following years. . 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, confectionery and beverage categories.

cstoredecisions.com

Swisher Sweets Mini pack the same great taste, freshness, and profits of Swisher Sweets into a smaller package. Donâ&#x20AC;&#x2122;t accept any substitutes! Give your customers what they prefer with classic Swisher Sweets quality. Add the full Swisher Sweets Mini lineup to your assortment today and enjoy big sales.

Mini drives large cigar category growth

+5.1%

Volume Growth

Mini selling in nearly

112,000

Stores (& Growing)

Source: MSAi Database 52 weeks ending 12/28/2019

800.874.9720 | swisher.com