Convenience Store Decisions March 2019

Volume 30 • Number 3 • MARCH 2019 Business Solutions for Retail Decision Makers

®

2019

Category Management Review Convenience categories are evolving quickly.

This year, CSD highlights the latest movers and profitable moneymakers.

INSIDE:

Pizza Profits to Climb

Figuring Juice and Tea Sales E-Cig Expectations Grow

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March 2019

Vol. 30 • No. 3

CONTENTS

Business Solutions for Retail Decision Makers

®

32 COVER STORY

2019 Category Management Review

Convenience categories are evolving quickly.

This year, CSD highlights the latest movers and profitable moneymakers.

EDITOR'S MEMO

BEVERAGES

8 Editor’s Memo: Empowering

48 Carbonated Soft Drinks

50 Cold & Frozen Dispensed

TECHNOLOGY

FRONT END

51 Juices & Teas

83 Prepaid Cards

10 On Location: Alltown Fresh

52 Bottled Water & Sports Drinks 54 Beer & Adult Beverages

84 Loyalty

86 Security & Cash Management

Leaders of the Future

Drives Innovation 18 CSD’s Quick Bites 20 Industry News 22 Sixth Annual YEO Conference Set for May 24 RaceTrac Announces Leadership Changes 26 SNAP Changes for Retailers 28 CM Leadership Profile: McPherson Making NOCO Better 30 CM Leadership Profile: Booth Revels in Fresh Approach 31 Convenience Store Solutions: Sir Isaac Newton and C-Stores

FOODSERVICE

56 Energy Drinks 57 Energy Shots

SNACKS 58 Salty Snacks

60 Meat Snacks 61 Snack Bars

62 Nuts & Seeds 63

DAIRY & ICE CREAM

CONFECTIONS 64 Chocolate

66 Gum & Mints

34 Chicken

TOBACCO

38 Sandwiches

70 Roll Your Own

36 Pizza

40 Roller Grill

42 Hispanic Foods 44 Bakery

46 Hot Dispensed

82

HEALTH & BEAUTY AIDS

88 POS

89 Electronic Payment

OPERATIONS 90 Fuels

92 Car Wash 94 Lighting 95 ATMs

BACK END 96 Product Showcase

100 Quick Stop 101 Ad Index

102 Industry Perspective:

Interesting Retail Discoveries

68 Cigarettes

72 Smokeless 74 Cigars

76 E-Cigarettes

78 Vaping Products

80 Tobacco Accessories

4 Convenience Store Decisions March 2019

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THE CSD GROUP Convenience Store Decisions • Leading Through Innovation www.cstore de ci si ons.com Convenience Store Decisions

CStoreDecisions ecisions .com

EDITORIAL

Senior Editor David Bennett dbennett@csdecisions.com

Contributing Editors Mark Battersby Anne Baye Ericksen Pat Pape Brad Perkins Jeff Steele Lisa White

Senior Editor/News & Online Erin Del Conte edelconte@csdecisions.com

Columnists Jim Callahan Mark Radosevich

Associate Editor Howard Riell hriell@csdecisions.com

Creative Director Erin Canetta ecanetta@csdecisions.com

Associate Editor Marilyn Odesser-Torpey mot@csdecisions.com

Production Manager Barbra Martin bmartin@csdecisions.com

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

ADVERTISING

Group Publisher Tom McIntyre tmcintyre@csdecisions.com 216-533-9186 Publisher John Petersen jpetersen@csdecisions.com 216-346-8790 Vice President, Sales Tony Bolla tbolla@csdecisions.com 773-859-1107

Digital Operations Manager Nicole Lender nlender@csdecisions.com EDITORIAL ADVISORY BOARD

Robert Buhler, President and CEO Open Pantry Food Marts Pleasant Prairie, Wis. Jim Callahan, Director of Marketing (Retired) Geo. H. Green Oil Inc. • Fairburn, Ga. Brad Call, President Colour Du Jour • Salt Lake City Bill Kent, President and CEO The Kent Cos. Inc. • Midland, Texas Greg Lorance, Dispensed Category Manager Cumberland Farms • Framingham, Mass.

Billy Milam, President RaceTrac Petroleum Inc. • Atlanta Patrick J. Lewis, Managing Partner Oasis Stop 'N Go • Twin Falls, Idaho Scott Zaremba, President and CEO Zarco 66 • Lawrence, Kan.

OFFICE LOCATIONS

Headquarters 1111 Superior Ave., 26th Floor, Cleveland, OH 44114 888-543-2447 Editorial and NAG 1420 Queen Anne Rd., Suite 4 Teaneck, NJ 07666 201-321-5642 http://twitter.com/CStoreDecisions www.facebook.com/CStoreDecisions www.linkedin.com/CStoreDecisions 6 Convenience Store Decisions March 2019

06_Masthead_0319.indd 6

NATIONAL ADVISORY GROUP (NAG) BOARD

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

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

SUBSCRIPTION INQUIRIES

To enter, change or cancel a subscription, please e-mail requests to bmartin@csdecisions.com or Mail: Convenience Store Decisions, 1111 Superior Avenue, 26th Floor, Cleveland, OH 44114.

Copyright 2019, WTWH Media, LLC

YOUNG EXECUTIVES ORGANIZATION (YEO) BOARD

Bart Stransky, Board Chairman RaceTrac Petroleum Inc. • Atlanta 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 Training Manager Chestnut Petroleum Inc. • New Paltz, N.Y. Lindsay Lyden, Vice President, Development Truenorth Energy • Brecksville, Ohio Jeremie Myhren, Vice President, IT Road Ranger • Rockford, Ill.

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

Convenience Store Decisions (ISSN 1054-7797) is published monthly by WTWH Media, LLC., 1111 Superior Ave., Suite 2600, Cleveland, OH 44114, for petroleum company and convenience store operators, owners, managers. Qualified U.S. subscribers receive Convenience Store Decisions at no charge. For others, the cost is $80 a year in the U.S. and Possessions, $95 in Canada, and $150 in all other countries. Single copies are available at $9 each in the U.S. and Possessions, $10 each in Canada and $13 in all other countries. Periodicals postage paid at Cleveland, OH, and additional mailing offices. POSTMASTER: Send address changes to Convenience Store Decisions, 1111 Superior Avenue, 26th Floor, Cleveland, OH 44114.

GST #R126431964, Canadian Publication Sales Agreement No: #40026880.

CONVENIENCE STORE DECISIONS does not endorse any products, programs or services of advertisers or editorial contributors. Copyright© 2019 by WTWH Media, LLC. No part of this publication may be reproduced in any form or by any means, electronic or mechanical, or by recording, or by any information storage or retrieval system, without written permission from the publisher. Circulation audited by Business Publications Audit of Circulation, Inc.

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EDITOR’S

Memo

Empowering Leaders of the Future

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

W

Set your own high standards.

E ALL KNOW YOUNG LEADERS do crucial work across the convenience store industry. Self-determined leaders never look They shape culture, improve employee perfor- outside themselves for the stanmance, drive creativity and innovation. And yet, fewer dards of their work. “Set your own training dollars are typically earmarked for next-genera- very high standards and strive to live up to them as far as possible,” tion executives than for people at other levels.

While this might not make sense given their expanded Deacon said. “You are the one who defines professionalroles, young leaders have an opportunity to distinguish ism and sets benchmarks—and when you do this, you themselves by improving their impact on those they lead will be recognized as a role model for others. Rememand on the company as a whole, according to leadership ber, however, that recognition is a byproduct, not a goal.

Your intention should be to do a great job because that expert David Deacon.

“I’m not saying you don’t need training in the tech- is the point. “ If you need training in a certain area, ask for it. There nical skills of management. But what makes a great manager has far more to do with attitude than anything are certain things all leaders need to be able to do: give else,” Deacon said. “While young leaders may not get feedback, coach employees, hold tough conversations, to choose the training their company invests in, you can communicate clearly, manage time and tasks, and so forth.

If you’re lacking in a critical area, ask for training, Deachoose your attitude.” con said. If your company can’t or won’t provide it, you must seek it out yourself. Be proactive about developing The best leaders intentionally choose the skills that will help you create the best environment possible for your team. Groups like the Young Executives the environment they hope to create.

Organization (YEO) are a good start to learn more about leadership issues and network with other young profesAttitude and intention are the cornerstones of becom- sionals looking for similar workplace solutions.

Treat employees like adults. Work is not school. ing what Deacon calls a self-determined manager—one who constantly and intentionally creates environments Adults do their best work when they are treated as adults. of over-achievement, where people thrive and produce Therefore, great leaders don’t bully, patronize or condescend. To generate trust and respect, you must create an great work.

“Bad leaders are so focused on their own needs or environment where adults can do great things.

Learn to like the people you work with—even the their own performance that they lose sight of the negative, unproductive, demotivating or destructive environ- unlikeable ones. If you deal with someone who is unment they are creating,” Deacon said. “On the other likeable, find something to appreciate about them. It hand, the best leaders intentionally choose the environ- changes the nature of all interactions and maximizes the chance that you’ll be successful. Everyone responds well ment they hope to create.”

Making this deliberate and intentional choice is the to being treated well.

“Until you believe that you are worth investing in, you most powerful thing you can do to become an exceptioncan’t be a self-determined leader,” Deacon said. “Deal leader. Here are a few pieces of advice from Deacon.

Get hyper-focused on the power of amplification. By cide right now that you not only deserve to become the virtue of being in a leadership position, your words and best leader you can possibly be, but that you are caactions are amplified. You cannot stop this, because it is pable of reaching this achievement on your own. Once inherent in the way organizations are shaped. Every pro- you do this, you’ll be unstoppable.” nouncement you make may be repeated many times by your direct reports, every action you take may be emulated many times, and every expectation you set will be reflected in the work of your team.

“

8 Convenience Store Decisions March 2019

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FRONTEND

Profile

Alltown Fresh Drives Innovation The new concept from Global Partners fills a void in the c-store space with fresh, healthy meals that cater to a range of alternative diets, plus bean-to-cup coffee, electric vehicle charging stations and much more.

By Erin Del Conte, Senior Editor

G

LOBAL PARTNERS LP’S NEW ALLTOWN Fresh location in Plymouth, Mass. focuses on providing fresh, healthy made-to-order food that caters to the range of alternative diets customers embrace today. The c-store conglomerate plans to grow the concept with more stores in 2019.

Global Partners supplies fuel to more than 1,600 locations and currently owns and operates 300 c-stores of various banners, including 74 COCO Alltown sites, all of which are located throughout New England in Connecticut, Rhode Island, Massachusetts, Maine and New Hampshire.

As a health-enthusiast and label-reader, Eric Slifka, CEO of Global Partners LP, believed the convenience store industry was missing a key opportunity to better serve the health-conscious consumer and tap into a growing demand for healthy products. He wanted to reach that consumer demographic while simultaneously creating a store with a unique edge.

Enter Alltown Fresh, which Slifka describes as “more of a marketplace than a convenience store” with a real kitchen and made-to-order offerings.

The Alltown Fresh concept store opened its doors in January, wowing customers with fresh food choices, bean-to-cup coffee, electric vehicle charging stations and more. “We want to make sure our guests feel like they can stop into this convenience marketplace and get healthy, clean, natural, organic, gluten-free, vegan, vegetarian, locally-sourced food items,” Slifka said. “We’re trying to appeal to those who have historically felt like they haven’t been served by the marketplace.”

Alltown Fresh spans 4,800 square feet and is situated at 22 Long Pond Road in Plymouth. The main way the Alltown Fresh concept differs from legacy Alltown locations comes down to the made-to-order restaurant-style food offerings. In addition to healthy, fresh foods, Alltown Fresh provides healthy snacks with clean ingredients alongside traditional convenience items.

10 Convenience Store Decisions March 2019

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FRONTEND

Profile Alltown Fresh customers can get healthy, natural, organic, gluten-free, vegan, vegetarian, locally-sourced made-to-order and grab-and-go food items, including popular protein bowls.

CLEAN & LOCAL The Alltown Fresh menu boasts made-to-order fresh options to accommodate a range of dietary preferences.

Breakfast options include the Clean Green breakfast sandwich made with cage-free egg or tofu, baby spinach, fresh avocado, chia seeds, Himalayan sea salt on a choice of bread.

Customers can select from wholesome sandwiches like the Veggie Palooza sandwich—made with fresh avocado, shredded purple cabbage, shredded carrots, green leaf lettuce, sliced tomatoes, red onions, garlic hummus and pesto; and protein bowls like the Teriyaki Tease bowl, which includes steak strips, roasted broccoli, sautÊed mushrooms, shredded carrots and three-grain brown rice blend in a teriyaki sauce.

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Alltown added bean-to-cup coffee Swiss Made coffee machines that press beans under five bars of pressure. Customers can select the organic or fair-trade coffee of their choice and the beans are ground at the time of selection, making for an extremely fresh cup of coffee. The beans are locally-roasted in Connecticut and coffee is available hot or iced.

Staying true to local and fresh throughout every aspect of the store is a key consideration.

Indoor and outdoor (as weather permits) seating encourages guests to stay a while.

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ELECTRICALLY CHARGED Alltown Fresh also offers four electric vehicle (EV) chargers —two at 150kW and two at 350kW—through a partnership with Electrify America. It’s the second location in Massachusetts to offer direct-current fast chargers (DCFC) at 350kW. “Today that’s the fastest commercialized public charging station available,” Slifka said. It’s seven times faster than most of today’s DC chargers. “It will take about 20 minutes to get an 80% charge for a 300-mile car with the 350kW charger. So customers can come into the restaurant and have a seat, or even sit outside and enjoy their time and take a break while they’re waiting on their vehicles to be charged.”

EV charging seemed an ideal fit, because not only is the c-store situated off a busy highway, but its target market of heath-conscious consumers often hold environmentallyconscious values as well.

While Slifka doesn’t have specific plans to roll out EV charging to other sites, he said it’s likely the brand will con-

14 Convenience Store Decisions March 2019

10-16_FE_Alltown.indd 14

When it comes to design, Alltown Fresh incorporates a modern style mixed with a New England farmstand feel through the use of natural wood and earth tones.

tinue to move in that direction when opportunity allows.

“It depends on the site,” he added. “Up here in New England, it’s a little bit hard to find the right size properties where you can build a store with the fueling availability you want to provide and that also has space for EV charging.

But where it fits and when the site is a high travel site, I’d say it’s likely you’ll see more of the electric vehicle charging on our sites.”

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To continue the “farmstand ambiance” of the store, Alltown Fresh includes a section devoted to local goods from wines and beers to cheeses and jams.

FARMSTAND VIBES The Alltown Fresh at 4,800 square feet is an ideal size, Slifka said. The site includes the space to offer 12 fueling positions out front, plus three diesel fueling positions in the back to accommodate 18-wheelers. Six truck-sized parking spots allow trucks to stay over night.

Design-wise, the store incorporates both a modern

style mixed with a New England farmstand feel through the use of natural wood and colors, and a chalkboard for the menu to complete the vibe.

“We wanted to feel local. When we talk with the town leaders, we want to make sure our stores fit into the town, but we also want to be distinct and different,” he said.

To further convey that local farmstand ambiance, the store offers a specific area dedicated to local goods. The items range from wines and beers to cheeses and jams.

Global Partners LP aims to expand the Alltown Fresh concept, and expects its foodservice offering to compete successfully against local restaurants.

Expansion plans are already underway. Slifka plans to roll out an additional five Alltown Fresh locations over the next 6-12 months.

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QuickBites Most Consumers Using Mobile Apps

for Digital Restaurant Orders

IN 2019 CUSTOMERS ARE SEEKING…

•Restaurant digital orders have grown at an average annual rate of 23% since 2013 and will triple in volume by the end of 2020.

•Six out of 10 digital orders are by mobile apps.

• A restaurant’s app or Website represent 70% of digital orders. The remaining orders are through third-party apps or other types of apps or Websites.

• Third-party apps, like DoorDash, Grubhub/ Seamless and UberEATS, account for 40% of the 20 most-used apps.

Source: NPD Group’s “Delivering Digital Convenience” report.

SNACKING CRAZE • Americans consumed nearly 386 billion units of ready-to-eat snack foods in 2018.

• Customers are demanding snacks with wellness benefits, more protein, portability, single-serve snacks and unique flavor mash-ups.

Source: NPD’s “Future of Snacking” report

• Health via ingredients like turmeric, ginseng and ginger.

• Nostalgia in comfort foods or classic recipes.

• Adventure through global spices like gochujang, or local flares like “Nashville Hot.” • Nature via aromatic herbs, seeds, and artisanal goods.

Source: The International Dairy Deli Bakery Association (IDDBA) in its “What’s in Store 2019?”

RTD AND ICED COFFEE SALES

Dollar Sales

Unit Sales

Price Per Unit

Current

% Change vs Y/AGO

Current

% Change vs Y/AGO

Current

$1.7 B

10.40%

577.9 M

8.60%

$2.87

Starbucks Frappuccino-Cappuccino/Iced Coffee

$579.2 M

0.40%

191.6 M

-1.40%

$3.02

Starbucks Doubleshot-Cappuccino/Iced Coffee

$441.0 M

-3.30%

153.4 M

-4.60%

$2.87

Java Monster-Cappuccino/Iced Coffee

$334.8 M

20.60%

122.5 M

18.70%

$2.73

Coca Cola Dunkin Donuts-Cappuccino/Iced Coffee

$88.8 M

6.70%

32.0 M

5.90%

$2.77

Private Label Cappuccino/Iced Coffee

$43.8 M

39.10%

19.5 M

32.40%

$2.25

Rfg Ready-to-Drink Coffee

$14.3 M

13.70%

4.4 M

3.80%

$3.25

Stok Ready-to-Drink Coffee

$6.6 M

36.40%

2.1 M

31.80%

$3.07

Peets Rfg Ready-to-Drink Coffee

$1.5 M

229.80%

361,538

213.90%

$4.06

Califia Farms Ready-to-Drink Coffee

$1.3 M

-1.10%

362,835

-0.70%

$3.66

Caribou Ready-to-Drink Coffee

$1.2 M

-55.00%

392,359

-56.70%

$2.94

Chameleon Cold Brew Rfg Ready-to-Drink Coffee

$1.1 M

129.90%

283,249

139.30%

$3.82

Cappuccino/Iced Coffee

Source: IRI, a Chicago-based market research firm, U.S. Convenience Store All Scan Data for the 52 weeks ending Dec. 30, 2018

18 Convenience Store Decisions March 2019

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7-Eleven Inc. Senior Vice President and Chief Accounting Officer/Controller Alicia Howell has been named to the Network of Executive Women (NEW) board of directors.

Her appointment was effective Jan. 1, 2019.

NEW is a women’s leadership organization aiming to create a community of leaders even more diverse than today.

At 7-Eleven, Howell leads a team of 500 employees. As a member of the NEW board, Howell will work to shape the organization’s leadership development programs, research and insights, and advocacy while creating sustainable changes for women in retail, consumer goods, financial services and technology.

Beck Rolls Out New Look

Beck Branded Fuels, a division of Beck Suppliers, has rolled out a new look and brand identity in Ohio as part of a strategic growth plan for this fourth-generation vertically-integrated energy company.

“We realized that a more cohesive and professional brand that ties all of our businesses together would make it easier for our customers and suppliers to understand all of the products and services we provide,” said Dean Beck, senior vice president of Beck Suppliers. “We are excited to see our new brand come to life for our Branded Fuels division.”

Beck Suppliers is made up of five strategic business units: Beck Branded Fuels, Beck Propane, Beck Fuel Systems, Beck Car Wash Systems and FriendShip Stores. Beck Branded Fuels supplies Marathon, Sunoco, BP, Shell and Valero motor fuels to independent gas stations and marinas throughout Ohio and northern Kentucky. As part of the new identity the company rolled out a new website: BeckBrandedFuels.com.

McLane Opens Distribution Center McLane Co. Inc. has opened a new grocery distribution center, McLane Ocala, in the Ocala International Commerce Center at 910 NW 50th Avenue in Ocala, Fla. The 400,000-square-foot facility will house 165,000 square feet of dry grocery, nearly 200,000 square feet of perishables and 35,000 square feet of office and support space. The first shipment arrived on Feb. 4, 2019 and deliveries will begin on March 17, 2019.

Visa, Mastercard to Raise Fees Purchases with credit cards will cost more for both merchants and consumers when Visa and Mastercard boost certain debit- and creditcard fees starting in April, the Wall Street Journal reported last month.

Currently, 1% to 2.5% of the price for goods and services go to cover card fees. As in the past, to protect their own profits, merchants might increase the prices consumers pay following such fee increases.

The National Association of Convenience Stores (NACS) was a named plaintiff in a class action lawsuit against the credit card companies and their issuing banks on grounds of antitrust violations. NACS successfully advocated for the courts to reject the inadequate settlement that was reached in that case in 2012 and the group continues to pursue reform through litigation.

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Richards Takes Over Helm at Thorntons Simon Richards, former head of regional development for BP Products North America, is taking the helm as the new CEO of Thorntons. Richards succeeds longtime chairman and CEO Matt Thornton.

The move comes as private investment firm Arclight Capital Partners and BP closed on the joint acquisition of Thorntons. The acquisition closed on Feb. 11. The Thorntons banner will remain on the 191 stores in the six states where it operates, according to a report in the Courier-Journal.

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FRONTEND

YEO News

Sixth Annual YEO Conference

Set for May

Young executives and next-generation leaders will convene at McLane’s Ozark Distribution Center for a firsthand look at how artificial intelligence and robotics are changing how products are brought to market.

By CSD Staff

Y

oung executives and next-generation leaders are invited to join the National Advisory Group’s (NAG) Young Executives Organization (YEO) Conference on May 1-2 in Springfield, Mo., for an inside look at McLane’s state-of-the-art Ozark Distribution Center and its robotics initiative.

The Ozark Distribution Center is one of the most sophisticated robotic distribution centers in the world. The nearly 400,000-square-foot facility is a completely automated distribution center utilizing Schaefer Systems integrated robotics, one of the world’s leading providers of intralogistics solutions.

“I am thrilled for the opportunity for so many of our up-and-coming industry leaders to get a behindthe-scenes look at this best-inclass, next-generation wholesale operation,” said Bart Stransky, YEO board chairman and executive director of merchandising and supply chain for Atlanta-based RaceTrac Petroleum. “Understanding the supply chain to our stores is an extremely important, and often overlooked, aspect of effectively managing a retail chain.”

The conference will also include ample networking opportunities with industry peers and a series of educational sessions focused on the unique leadership challenges facing the convenience store industry’s next-generation executives. Attendees will also receive a tour of local convenience stores in Springfield, Mo. Attendees can opt to arrive the day before the YEO Conference to participate in a special YEO volunteer lead-

ership project with Habitat for Humanity—set for April 30.

Young executives under 40 are invited to visit https:// nagconvenience.com/2019-yeo-conference to get a preview of the agenda and register for this can’t-miss event.

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

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

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

Furthermore, membership in YEO is open to all NAGmember company employees at no cost. If you are not a NAG Member, join NAG now by visiting www.nagconvenience.com.

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

YEO Conference attendees will get a firsthand look at McLane’s Ozark distribution center, which is completely automated and relies on integrated robotics.

22 Convenience Store Decisions March 2019

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FRONTEND

News

RaceTrac Announces Leadership Changes The Atlanta-based chain also seeks to fill immediate openings for its new c-store franchisee program in central Florida.

By CSD Staff

R

aceTrac Petroleum Inc., which is celebrating 85 years in 2019, has announced new executive leadership promotions and a new franchise program with opportunities immediately available in central Florida.

In February, the Atlanta-based chain, which operates over 500 convenience store locations in Georgia, Florida, Louisiana and Texas, announced its new leadership structure including: Max McBrayer, RaceTrac’s current chief financial officer (CFO) and CSO (chief supply officer), has been promoted to CEO. Natalie Morhous, vice president of energy dispatch, has been promoted to president of RaceTrac.

Melanie Isbill, executive director of marketing, has been promoted to chief marketing officer.

AJ Siccardi, vice president of Metroplex Energy, has been promoted to president of Metroplex Energy.

Billy Milam, who currently serves as RaceTrac’s president, will transition to chief operating officer (COO).

Joseph Akers will retain his title as chief legal officer.

With these changes, Carl Bolch Jr. is also returning to his role as executive chairman.

Morhous and Isbill, who are members of RaceTrac’s board and Bolch’s daughters, are taking on roles that will ensure “continued connectivity between family legacy and business priorities,” the company said.

Additional promotions include: Robby Posener was named vice presi24 Convenience Store Decisions March 2019

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dent of RaceWay; J. Gilmore is pro- Each store has fuel gallon sales nearly moted to vice president of energy three times the NACS Industry Average.

RaceTrac franchise owners will bendispatch and supply chain; and Bart Stransky was promoted to vice presi- efit from the brand’s conveniently located stores, comprehensive training dent of merchandising.

The leadership restructuring comes program and proven experience in after a busy 2018 for RaceTrac where marketing, operations and merchanthe chain announced its expansion dising. In addition, franchise owners into Tennessee, opened its 500th lo- will be able to take advantage of the cation, was awarded Top Workplace company’s strong brand reputation and titles in five of the regions in which presence in the central Florida region.

“As a pioneer and trusted leader in the company operates and raised $730,000 for The Michael J. Fox the convenience store industry, RaceTrac has prided itself in delivering a Foundation for Parkinson’s Research. top-tier guest experience since 1934,” said Natalie Morhous, president of RaceTrac. “Now, in our 85th year, we are capitalizing on our conveniently located stores, and expertise in fuel and merchandise retailing, to recruit and support qualified entrepreneurs in central Florida. We look forward to working with franchise owners on this exciting new business opportunity.”

FRANCHISE OPPORTUNITIES RaceTrac also announced the launch of its new c-store franchise program—RT Franchising Inc.— in February, for which it is now seeking qualified candidates.

Franchise opportunities currently exist at three modern c-store locations in Florida in Clermont, Mt. Dora and DeLand. All three locations offer guests Swirl World frozen dessert stations, large coffee areas with a new freshlyground, freshly-brewed “Crazy Good Coffee” experience, a ‘shoppable layout,’ ample seating and free Wi-Fi.

QUALIFIED CANDIDATES RaceTrac is now searching for qualified candidates for its new franchise option.

The chain is seeking franchisees with “strategic agility, business acumen, integrity and the ability to build an effective team.”

Ideal candidates, according to a company press release, should be looking for a hands-on business opportunity where franchisees are actively involved in the day-to-day operations. Potential franchisees should have a net worth of at least $700,000 and liquidity of at least $350,000.

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FRONTEND

News

SNAP Changes for Retailers Although convenience stores represent more than 45% of U.S. retailers participating in SNAP, they account for less than 6% of the redemptions.

By Mark Battersby, Contributing Editor

P

resident Trump on Dec. 20, 2018 signed into law the Agriculture and Nutrition Act of 2018, also known as the Farm Bill.

A portion of the expansive bill reauthorizes the Supplemental Nutrition Assistance Program (SNAP). More than 119,000 convenience stores accept SNAP benefits and serve the communities in which they operate.

The program assists approximately 44 million Americans each month.

Although convenience stores represented more than 45% of U.S. retailers accepting SNAP payments, they

account for less than 6% of the overall redemptions.

Surprisingly, however, more than 52% of SNAP dollars, or $3 billion, was redeemed at big-box stores such as Walmart and Target.

According to Eva Rigamonti, an associate in the government affairs and public policy practice at Steptoe & Johnson LLP and an advisor to the National Association of Convenience Stores (NACS), the c-store industry is awaiting new food category standards from the U.S. Department of Agriculture (USDA).

PORK BARREL “The USDA’s efforts to increase the categories of required items from the current three to seven items are mired in controversy centered over the definition of many of those items,” Rigamonti said. “Should bacon and ham be separate categories or fall into the allencompassing category of pork?”

According to Rigamonti, convenience store operations, particularly larger chains operating across state lines, prefer the more straightforward, consistent federal rules.

The Food and Nutrition Act of 2008

NACS Commends Ban on SNAP Processing Fees The National Association of Convenience Stores (NACS) applauded Congress for passing legislation that bans processing fees on all Electronic Benefits Transfer (EBT) transactions and reiterates the current ban on interchange fees from these transactions.

The U.S. House of Representatives last month passed H.R. 2, the Agriculture and Nutrition Act of 2018, known as the Farm Bill, by a vote of 369-47, clearing one of the final hurdles for the bill to become law. The compromise bill was finalized earlier this week and sailed through the Senate on Tuesday afternoon by a vote of 87-13.

The final Farm Bill was championed by Senate Agriculture Committee Chairman Pat Roberts (R-Kan.) and Ranking Member Debbie Stabenow (D-Mich.) and House Agriculture Committee Chairman Mike Conaway (R-Texas) and Ranking Member Collin Peterson (D-Minn).

More than 119,000 convenience stores accept SNAP benefits and serve the communities in which they operate.

During the Farm Bill process, NACS has advocated for the critical role convenience stores play in providing access to food for SNAP beneficiaries.

26 Convenience Store Decisions March 2019

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defined eligible food as any food or The USDA’s efforts to increase the categories of food product for home consumption, required items from the current three to seven items including seeds and plants, which produce food for consumption. In 2014, are mired in controversy centered Congress passed legislation that imover the definition of many of those posed additional obligations on retailitems. Should bacon and ham be ers that redeemed SNAP benefits. separate categories or fall into the The 2014 requirements mandated certain SNAP-authorized retail food all-encompassing category of pork? stores have available on continuous basis at least three varieties of items – Eva Rigamonti, an associate in the government affairs in each of four staple food categories. and public policy practice at Steptoe & Johnson LLP Subsequently, USDA increased this to a mandatory minimum of seven varietHowever, because the current defiies in each of the four categories. Re- remain concerned about the admintailers were also required to implement istration’s plan to deliver so-called nition of food is a specific part of the point-of-sale technology capable of “Harvest Boxes” filled with shelf-stable act, any changes would require confood to more than 16 million SNAP re- gressional action. preventing fraudulent transactions.

Although the USDA’s rule-making Under the final rule, retailers aren’t cipients. The move sought to cut $129 eligible to be SNAP retailers if 50% or billion in spending over the next 10 process is a lengthy one, including more of a c-store’s total gross sales years and source items from whole- a 30-day commenting period, the updated SNAP retailer requirements, (including fuel) are of heated foods. sale channels rather than retailers.

Under this largely-ignored propos- including the expanded list of acThis is a big improvement compared to the original proposal, which dis- al, SNAP recipients who currently re- ceptable food categories, would be qualified retailers if 15% or more of ceive at least $90 per month through unlikely to become a reality before a store’s total food sales came from the program would instead receive mid-year.

The 2018 Farm Bill, unveiled on items cooked or heated on site before about half of their benefits in the form of a Harvest box, enabling recipients Dec. 11, 2018, left largely untouched or after purchase.

Last year, as part of the Trump Ad- to make their own meals with the in- the requirements for qualifying for SNAP benefits. NACS reported the ministration’s largely ignored budget gredients provided.

The package would include items Farm Bill is especially relevant to the proposal, an “application fee” for retailers seeking to participate or renew such as “shelf-stable milk, ready- convenience store industry because it participation in SNAP was proposed. to-eat cereals, pasta, peanut butter, reauthorizes SNAP. The Farm Bill Conference CommitThe proposed fee was be levied on beans and canned fruit and vegetaa per-store basis (not per company), bles.” The remainder of the benefit tee resolved work requirement issues.

NACS, along with other retail trade and would be dependent on how would go on the SNAP Electronic much business each store generated. Benefit Transfer (EBT) card for use at associations, has reportedly spent the last two years lobbying for the permaapproved grocery retailers.

HARVEST BOX In addition to causing SNAP ben- nent ban on fees.

The compromise bill also permaFor smaller retailers, the fee could efits redeemed at stores, including be as little as $250 with larger retailers c-stores, to plummet, the proposal nently bans processing fees on EBT would reportedly give individual transactions and reiterates the ban on paying as much as $20,000.

This year, grocery retailers were states “substantial flexibility” about market interchange fees.

Rigamonti pointed out, conveconcerned about the administration’s the delivery process. In other words, proposed $130 billion in cuts to SNAP. each state could transport the boxes nience stores will need to keep a close watch on program developments, According to the Wall Street Journal, to recipients in a different manner.

Should any of these earlier propos- both in Washington, D.C., and at the reduction would amount to a 20% smaller annual budget, and would als have become a reality, National the state level. After all, any changes, come at a time when grocery retailers Public Radio predicted more than even ones that are small could have 80% of the SNAP benefits redeemed major repercussions on the alreadycan’t afford to lose sales.

Now assumed by industry experts at stores—including convenience challenged profit margins of convenience store retailers. to be largely dead, many grocers stores—would fall.

“

”

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March 2019 Convenience Store Decisions 27

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CATEGORY MANAGEMENT LEADER

McPherson Making NOCO Better As Melissa McPherson hones her category management skills at the NOCO Express convenience chain, she’s also at the forefront of how the convenience chain is preparing its future course.

By David Bennett, Senior Editor

Melissa McPherson

G

Providing customers with what they want, where they rowing up in the Buffalo area, Melissa McPherson knows how to keep moving forward even want it and when they want it requires attention to dewhen adverse conditions rise up to test your focus. tail and constant due diligence. Packaging and brand is Of course, it’s not only the weather that can bring chal- a key consideration in some customers’ decision-making. lenges. So too can being a category manager for a grow- Others may want functionality and convenience. Regarding convenience chain. For those in the know, category less, the decision-making process is key. “We look at each management in one is a process of driving and delivering item differently,” McPherson said. “Some items we will value, growth and innovation. Of course the daily respon- test out at a few key locations so we can gather customer feedback. But then there are other items where you know sibilities can seem endless.

At 39 NOCO Express locations, McPherson manages you have to have it right away.”

It also involves tracking ongoing retail trends, “what is non-alcoholic beverages, salty snacks, candy, grocery, auto, general merchandise, packaged sandwich, dairy, the new hot flavor and how can we get it in the stores.”

No convenience operation is absent of challenges. frozen, and health and beauty cosmetics. Those are a lot Like other Empire State c-stores, of important categories for the famNOCO faces rising transportation ily-owned NOCO, headquartered costs—driven in part by local driver in Tonawanda, N.Y., which recently shortages and tariffs. marked 85 years in the western part of the state.

FRIENDS & FAMILY Because of her influence at the Also, no job as diverse as the one growing business, CSD is recognizing of category manager would be comMcPherson as a 2019 Category Manplete without platform changes and agement Leader. sometimes, reinstituting good ideas. One of the biggest The mornings start early for McPherson.

“The biggest challenge is trying to balance everything,” for McPherson’s team and NOCO Express was relaunching she said. “Coming from Pricebook it was easy to almost the brand’s “Friends & Family” loyalty program in 2018.

“This occurred back in May and has been a huge hit go through your day with a checklist, but moving into category management is pretty different. No day is the with our customers. We offer a three-cents-per-gallon same as the one before. It’s always changing and you just savings as well a variety of in-store specials that are only available to our Friends and Family members.” need to be able to adjust your time.”

While serving its customers is the primary agenda for She also oversees NOCO’s Pricebook manager, trainNOCO Express, the c-store retailer works to bolster its ing her in category management as well. core foundation, including its company culture. It’s someCUSTOMER-CENTRIC thing McPherson sees happening in various ways.

“Last year we began ‘a day in the office’ for our store Before coming to NOCO, McPherson worked at the Wilson Farms convenience chain, as part of the chain’s managers,” McPherson said. “The store managers come shrink team, then moved on to point-of-sale coordinator into the corporate office and spend one on one time with each member of the office team to get a better underand then onto Pricebook manager.

After Dallas-based 7-Eleven acquired 188 Wilson stand of their role. It really helps the managers see how Farms convenience stores in April 2011, McPherson had everyone may be working on different tasks, but all workthe opportunity to work for another community-oriented ing for the same goal.”

When she’s not making the NOCO experience better convenience chain in New York State, where’s she’s happy for the opportunity because she has a direct effect on the for patrons, McPherson enjoys cooking, reading, gardening and spending time with her family. type of products customers choose every day.

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cstoredecisions.com

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CATEGORY MANAGEMENT LEADER

Booth Revels in Fresh Approach Rutter’s is intent on cultivating relationships with both its customers and the local supplier base. Cheri Booth is playing a key role in making sure it happens.

By David Bennett, Senior Editor

Cheri Booth

C

heri Booth has been working at Rutter’s for more than 10 years, but these days, she has a fresher perspective on her work.

Booth serves as Fresh & Local category supervisor for the York, Pa.based convenience chain. She plays a vital role when Rutter’s last fall began expanding its Fresh & Local initiatives by adding seasonal fruits and vegetables to grab-and-go cold cases and fresh, restaurant menu offerings.

Now the c-store is offering customers a fresh assortment of watermelon, blueberries, heirloom cherry tomatoes, sweet corn and yellow and green squash in the grab-and-go case—located in the center of the store.

Watermelon, blueberries, tomatoes and other produce items are sold in ready-to-eat packaging, perfect for a quick, healthy snack.

The sweet corn and squash are fresh packed whole for customers.

In her role, Booth is responsible for bringing fresh supplies to Rutter’s expanding retail table. For that, CSD is recognizing her as a 2019 Category Management Leader.

LOCAL FOCUS Having steadily promoted a robust foodservice program, Rutter’s is now using fresh and local ingredients in its on-site restaurants.

Some of the ingredients include sliced and chopped sweet onions, sliced green peppers and mushrooms, all grown in Pennsylvania.

And as the growing seasons change, so does the fresh selection.

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In describing the overarching scope of her role, Booth said her immediate duties are transparent within the convenience chain.

“I am responsible for several of my own in-store categories, and I overlap all c-store categories if a product is fresh or local and work with the category supervisors for implementation of new local/fresh products,” Booth said.

However, the dynamics of her role requires Booth to research local businesses and products that are region-

ally relevant to the 73 store locations.

“I work with local businesses to tell consumers the story behind the product, such as if the company is family owned, the span of generation, the employment opportunities for the community the company provides, sustainability efforts that it undertakes, etc.,” Booth said.

According to LocalHarvest.org, the average commute for fruit and vegetables in the U.S. is 1,500 miles—a long time by the average person’s standards. Rutter’s reasons that local foods travel a fraction of that distance and still maintain their appearance, taste, quality and nutrients.

The premise of offering local foods is starting to grow in terms of being a strong selling point with Rutter’s

customers, not to mention establishing beneficial ties with neighborhood suppliers.

“Working with a produce supplier has allowed us to continue to grow our fresh and local initiatives through backhauling and distribution with some of our local partners while also providing fresh, quality offerings,” Booth said.

BEFORE FRESH Born and raised in Red Lion, Pa., Booth joined Rutter’s in 2018 first as a team member. She has also filled the role of restaurant manager and food service quality supervisor, before being named Fresh & Local category supervisor last year.

Rutter’s now works with more than 55 local brands, including Spring Glen Fresh Foods, Kunzler & Co. and Wintergarden Quality Foods, plus 12 Pennsylvania, Maryland, New Jersey and Virginia produce farms for both retail packaged products and ingredients for freshly-made restaurant items.

To expand its fresh fare further, Rutter’s menu recently added pork belly from local vendor Garrett Valley in Swedesboro, N.J. The convenience store retailer is aware of the growing demand for transparency, which aligns with its fresh initiatives.

“Consumers now more than ever are reading labels, looking for clean labels—what’s in their food—along with a strong commitment to buying local and the sustainability efforts being taken by those businesses,” Booth said.

cstoredecisions.com

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CONVENIENCE STORE SOLUTIONS

Sir Isaac Newton and C-Stores Newton’s laws of motion laid a foundation for groundbreaking science. With a little tweaking, the same rules can apply to your convenience store operation.

By Jim Callahan, Contributing Editor

P

LAYING HOCKEY, DRIVING A CAR or simply taking a walk down the street are all everyday examples of Sir Isaac Newton’s laws of motion. How this scientist and his laws can be applied to the convenience industry might be a stretch unless you look at it from a business perspective.

As the story goes, a rush of awareness came over Newton when an apple from a branch fell and bonked him on the head. Afterward, Newton was able to devise the three laws of motion, describing the motion of massive bodies and how they interact.

• Newton’s first law of motion states: “Every object will remain at rest or in uniform motion in a straight line unless acted upon by an external force to change its motion.” It goes to reason that if you sit in your office and do nothing productive to help your business thrive, you will not have a positive influence on the dynamics that will help move the company forward.

FORWARD MOMENTUM Positive motion can pertain to employee hiring, for example. I pick this example because nothing can set your company back like a bad hire. Instead of letting one bad apple spoil the bunch, make an extra effort to bolster weak hiring practices. There are plenty of industry tools at your disposable to help improve your systems.

If you are dong marginal background checks, make an effort to rethink how you’re evaluating candidates. If you don’t have a solid drug-testing policy, implement one.

Never stoop to hiring “warm bodies” when we already know and our background checks prove these individuals just don’t have what it takes. If we are to achieve our aspirations, we can’t do it with sub-par employees.

Hold employees to the rules. Begin transitioning from just verbal warnings to formal write-ups. Don’t be afraid to keep a file on employees so you can keep a record of their counseling sessions, their training records and other documents important to their standing with the company.

Provide meaningful incentives and achievable bonuses. Have a good promotion system so that you are moving qualified staff up the ranks.

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Jim Callahan has more than 40 years of experience as a convenience store and petroleum marketer. His Convenience Store Solutions blog appears regularly on CStoreDecisions.com.

He can be reached at (678)485-4773 or via email at jfcallahan1160@ gmail.com.

• Newton’s second law states: “Every point’s mass attracts every other point’s mass, by a force acting along the line intersecting both points.” It’s much longer, but this will suffice.

In the words of an operator, an employee’s efforts, skills, attitude, professionalism, honesty, etc. have a direct effect on all other employees and your overall business.

That’s why it’s so critical to find and pay for those that will bring excellence and positivity to the table.

• Newton’s third law states: “For every action there is an equal and opposite reaction.”

Take for instance c-stores that endeavor to save precious dollars by waiting an extra half or full hour before turning their outside lights on or, conversely, turning them off in a foolish attempt to save dollars. Many customer are comforted by good lighting. Shutting it down runs the risk of alienating a good customer.

The same can be said for keeping hot dogs on the roller grill too long to avoid throwing them out. Or keeping the coffee in the pot too long to squeeze that last bit of revenue out of an unsuspecting patron. Once he or she gets a taste of that over-cooked product, the perception he or she takes away is permanent. That’s the reaction you don’t want.

Take a page out of the book that quality convenience chains operate from and study how they are doing it.

They understand that food and coffee waste are part of the price of doing business. It’s the impression you leave with the customer that’s the most valuable commodity, not an extra hot dog sale.

If you’re unsure of how to approach these topics, there are plenty of experts who are glad to advise.

And remember, gathering positive forces around you can only strengthen the whole unit. Harnessing their good attitude, brainpower and dedication will surely help lead your team and your company to greater heights and success.

Otherwise you might fall victim to gravity, and as Sir Isaac can attest, gravity can be a real eye-opener.

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Introduction

2019 Category Management Review Business Solutions for Retail Decision Makers

®

2019 Category

Management

Review

Convenience categories are evolving quickly. This year, CSD highlights the latest movers and profitable moneymakers.

A CSD Staff Report

I

f there is one word that perhaps best describes most coolers and self-serve fountains or dispensers, according to convenience categories in 2019 it might be innovation. Datassential’s latest Non-Alcoholic Beverage Keynote from We’re talking innovation on the part of fast-moving October 2018. consumer product manufacturers and innovation on Brand preference is the top driver of retail sales of the part of convenience retailers looking to separate them- soda, juice, energy and sports drinks, and is even a factor selves from the competition. for 60% of bottled water buyers. About half of operators Over the past year, to capture consumers’ ever-fluctuat- say brand is important in customers’ purchases of packing preferences, more c-stores began offering store-made aged water, juice and iced tea, and three-quarters say so pizza, bean-to-cup coffees, locally-sourced proteins, delec- for soda. table smoothies and fresh fruits and vegetables.

In terms of category merchandise, there was much for category managers to decipher, from vitamin waters to BETTER FOR YOU PRODUCTS fruit-infused carbonated drinks to M&M’s chocolate bars.

Such diversity reflects the changing tastes of a U.S. con- Finding better-for-you (BFY) products in a convenience store is extremely/very important to 47% of consumers. The most sumer base that is widening when it comes to the number frequent users of convenience stores—males between the of customers that frequent the neighborhood c-store. ages of 18-24—report finding BFY options slightly more An average convenience store selling fuel has around important than the average consumer.

1,100 customers per day, or more than 400,000 per year, according to the National Association of Convenience When asked how important it is to you to find Stores (NACS). Cumulatively, the U.S. convenience store “better-for-you” products at a convenience store: industry alone serves nearly 165 million customers per day, and 58 billion customers every year.

That’s a lot of customer preferences to track. Some categories are being dramatically impacted.

BEVERAGES REFRESH Brands wield more power in non-alcoholic beverages than almost any other product category, fueled by consumer loyalty and operator priorities in customer-facing 32 Convenience Store Decisions March 2019

32-33_Cover Intro.indd 32

Source: Q1 Consulting, 2018 C-Store Consumer Survey

cstoredecisions.com

2/26/19 2:27 PM

TOBACCO EVOLVES In 2018, Juul almost singlehandedly rejuvenated a lagging e-cigarette segment.

With the decline of cigarette sales, Big Tobacco is investing more time and resources to growing its nextgeneration products in response to the waning demand for traditional combustible products like cigarettes.

And the success stories that major tobacco manufacturers aren’t writing, they are collaborating on.

The biggest headlines appeared in this past December with tobacco giant Altria investing $12.8 billion in Juul, taking a 35% stake in the e-cigarette maker.

BEVERAGES MAKE A SPLASH IN 2018 At c-stores, sports drinks, energy drinks and ready-to-drink teas and coffees saw increased dollar sales in 2018 while juices and soft drinks dipped. The milk segment declined despite a sales boost from customer interest in plant-based options like almond and coconut milks.

Dollar Sales

Unit Sales

Current

1-Year % Change

Current

1-Year % Change

Bottled Juices - SS

$1.55 B

-2.1%

922 M

-3.9%

Carbonated Beverages

$8.55 B

-0.6%

4.80 B

-2.3%

Beverage Types

Sports Drinks

$2.91 B

5.3%

1.62 B

2.9%

Tea/Coffee — Ready-To-Drink

$3.40 B

4.8%

1.74 B

1.3%

Energy Drinks

$8.97 B

7.9%

3.49 B

6.9%

Milk

$1.43 B

-7.8%

580 M

-7.1%

Source: IRI, a Chicago-based market research firm, U.S. Convenience Store All Scan Data for the 52 weeks ending Dec. 30, 2018

TECHNOLOGY ABOUNDS According to estimates from Grand View Research, the Internet of Things (IoT) at retail could be a $94 billion market by 2025. The impact of IoT is already undeniable, helping c-stores modernize their operations, better manage inventory, reduce shrinkage and hone their supply chain efficiencies.

IoT is just one part of the scenario as convenience stores are implementing new means to interact with consumers on social media, employing beacon technology to harness data and upgrading point-of-sale systems to accommodate the rapid move to a mobile-wallet economy.

FUEL FOR THOUGHT Ethanol-blended fuel is slowly making in-roads into the c-store channel, though market forces and issues prompted by government oversight have combined to slow adoption of E15. According to John Eichberger, executive director of the Fuels Institute, E85 fuel faces its own uncertain future.

“In terms of E85, there is no incentive remaining for automobile manufacturers to produce flex fuel vehicles. The CAFE credit they used to receive has expired and most forecasts I have seen expect production to reach minimal levels within the next five years or so,” Eichberger said. “We have seen an expansion in the number of E85 outlets, but I suspect this is largely due to the need to have E85 in order to offer E15.”

Aside from ethanol blends, biodiesel and other offerings, more c-stores are also adding electric vehicle charging stations.

ALTERNATIVE MEASURES As an increasing number of states legalize the use of cstoredecisions.com

32-33_Cover Intro.indd 33

marijuana, a product known as CBD oil has surged in popularity. This past December, CNN dubbed CBD “USA’s coolest food and drink ingredient.”

According to Vaping360, CBD oil alone is already a $340 million market, and sales of the compound, in all of its diverse forms, are on the rise.

A new whitepaper from Euromonitor International assesses how the inevitability of recreational legalization of marijuana is set to shake up fast-moving consumer products, including beverages, food, health and beauty, and tobacco, among other categories. Among some observations: • Alcohol: Currently, alcohol has added the most products in the CBD/cannabis sector, so a future where CBD-based products replace alcohol by volume may be on the horizon, according to industry observers.

• Tobacco: By 2030, the vaping of cannabis alongside consumption in other formats will have “irrevocably” framed the expectations of consumers with respect to the delivery of nicotine.

• Soft drinks: In the short-term, the main opportunity for cannabis within soft drinks will be CBD-infused beverages.

• Packaged food: Global sales of packaged food with CBD are expected to double over the next two years.

• Beauty: Skin care is expected to be a main driver.

• Consumer health: Vitamins and dietary supplements are predicted to be the largest cannabis-related category in consumer health by 2025.

There’s more on the horizon for c-store categories. On the following pages, CSD provides a snapshot of the trending topics affecting each one as 2019 rolls on.

March 2019 Convenience Store Decisions 33

2/26/19 2:27 PM

/

Foodservice

Chicken

Chicken Flies

with Customers

I

n a U.S. Chicken Consumption Report published in July 2018 by the National Chicken Council (NCC), 68% of consumers said they ate a chicken meal or snack purchased from a foodservice establishment in the two weeks leading up to the survey.

Those chicken consumption numbers show an increase of 1.5% over the year prior, reflecting recovery from a slight dip in 2017.

The average number of times consumers said they had eaten a chicken meal or snack from a foodservice establishment was 2.2 times in the prior two weeks, the same as it had been for 2017 and 2016. Twenty-nine percent said they ate chicken three or more times in the past two weeks.

Furthermore, 19% of the respondents said they anticipated eating more chicken from a foodservice establishment over the next 12 months. With Americans already clearly demonstrating their love of chicken, foodservice operators have ample opportunity to build sales by offering some slight variations on the familiar fare.

“For a fried chicken offering feature dark-meat chicken parts at a special price to encourage trial,” said Tom Super, NCC’s senior vice president of communications. “Or try rotating in different spices or other flavors to extend the audience for chicken.”

PROPRIETARY CHICKEN Chicken has been one of the major areas of focus for Fremont, Ohio-based FriendShip Food Stores over the past several years, leading to a total revamp of its program.

Ed Burcher, FriendShip’s vice president of foodservice, explained that for years the chain sold a distributor-branded program that “was doing okay, but provided little in the way of product and development updates.”

Early last year, the new FriendShip Kitchens brand (which also encompasses the pizza, breakfast and FreshTo-Go sandwich categories) was introduced into new stores

Fast Facts: » Some 29% of people surveyed said they ate chicken three or more times in the past two weeks. » Because of its flexibility chicken appears in many menu dishes.

34 Convenience Store Decisions March 2019

34-46_Foodservice.indd 34

CHICKEN SALES SHOW PLUCK In the last two weeks a majority of Americans (68%) have consumed a chicken offering—a rising trend that includes the c-store channel. The popularity of chicken menu items helped drive overall foodservice sales in the convenience industry in 2018.

68% of consumers have eaten a chicken meal or snack from a foodservice establishment in the past two weeks

In the past two weeks, consumers have eaten a chicken meal or snack from a foodservice establishment 2.2 times

More 19%

About the Same (VALUE)

Less 18%

19% of consumers anticipate eating MORE chicken from a foodservice establishment in the next 12 months.

Source: National Chicken Council, January 2019

and remodels. The chicken is also set to roll out to all of FriendShip’s 26 stores.

“We changed every component of the product, moving to a proprietary seasoning blend and offering new formulations of tenders and bone-in chicken using a marinated product,” Burcher said. “We currently launched Spicy Chicken Tenders as a limited time offer (LTO) and are featuring a four-piece bone-in-chicken special to bring some interest and highlight that product.”

Being a smaller chain with a proprietary program allows FriendShip Kitchens to be especially nimble when it comes to bringing LTOs and other new products to market.

So far, tenders are the clear winner when it comes to the popularity of menu items. Already “famous for chicken,” as Burcher pointed out, the protein is also used as a key ingredient in the retailer's signature wraps for its Fresh-To-Go case and as a topping for salads. cstoredecisions.com

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Foodservice

Pizza

Pizza Profits to Climb

F

Fast Facts:

or the year ending November 2018, pizza serv- tegic consulting firm Pentallect. ings at total foodservice, restaurants and other “People will go out of their way to » Pizza may be ubiquifoodservice outlets were up 1%—or 5.1 billion serv- get a good pizza.” tous, but can still be a Friends noted that one of pizings—compared to the year before, according to differentiator. za’s major appeals is that it is a market research company NPD Group.

Pizza servings rose 6%—205 million servings—in the convenient carrier for all manner » Half of U.S consumof ingredients and flavor profiles, c-store channel. ers like to choose their Projected to be a $47.2 billion business in 2019, pizza lending itself to customization. own pizza creations. may be an established food staple, but it continues to grow Friends said more than 50% of in sales volume. By 2022, total pizza sales aided by home consumers prefer to build their delivery and takeout sales are anticipated by Euromonitor own pie creations.

International to increase to $50 billion.

“Pizza is a ubiquitous food, but if it’s done right it may CREATIVE APPEAL be a differentiator and drive traffic to stores,” said Barry This is especially true when they are ordering on their Friends, a partner at Chicago-based food industry stra- computers, phones or at in-store kiosks, Friends said, where they mix and match crusts, sauces and toppings.

It’s easy to boost the excitement level of the category with the addition of ingredients the c-store retailer already FACTORING IN PIZZA PREFERENCES has in inventory. Friends mentioned a Buffalo mac-andA Mintel report asked 1,776 internet users over age 18, “Which cheese version and one topped with chicken and hot sauce. of the following factors are most important to you when choosVariety resonates with customers at Reno, Nevada’s ing which pizza restaurant to order from? Select up to three and Shop ‘n’ Go. In addition to 17-inch pies with traditional toprank in order of importance.” Respondents ranked the followpings, Shop ‘n’ Go offers 12-inch, thin-crust artisan pizzas ing factors: with such gourmet toppings as prosciutto and goat cheese, 60 said Joe Linscott, the company’s general manager.

Crust 26 While the artisan pizzas get a lot of attention, the regular 42 17-inchers do a brisk business as well.

Sauce 11 “We’re very well known for our pizza,” Linscott said.

Both the regular and artisan pizzas are made to order.

38 Cheese 11 He is anticipating continued growth in the category this year—not just at meal-time, but in between as well.

32 Meat

11

Speed of delivery

Selection of specialty pizzas

26

13

Vegetables Non-pizza entrees 1 Beverages

13

4

2

ANYTIME MEAL

31

15

Any Rank

6

Most Important

5

Desserts 1 3

0

10

20

30

Source: Mintel’s report “Pizza Restaurants U.S.,” November 2017

36 Convenience Store Decisions March 2019

34-46_Foodservice.indd 36

40

50

60

“We sell pizza all day,” Linscott said. “Some customers just come in for a craft beer or other beverage and pizza anytime during the day.”

Breakfast pizza is a healthy sub-category for the same reasons that the pies are popular all day, Friends added.

“Pizza is a convenient choice anytime because it travels well without getting messy and can be eaten anywhere, Linscott said. “It’s a logical component of a convenience store foodservice offering.”

With the proliferation of delivery services such as Grubhub and Uber Eats, pizza has become even easier to get from just about any foodservice establishment, Friends pointed out. To win the “who has the best pizza” battle, convenience stores have to produce a high-quality product consistently. cstoredecisions.com

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Foodservice

Sandwiches

Growing Fresh Sandwich Sales

A

lthough sandwiches are already the No. 1 U.S. food consumed at lunch, which was as true 10 years ago as it is now, there is still “tremendous opportunity for growth for operators who are willing to innovate and elevate” their offerings, said David Portalatin, food industry advisor with NPD Group.

“That could be as simple as changing the breads, for example, using a tortilla to create a wrap instead of two slices of bread,” Portalatin said. “Or it could be using premium meats and artisanal cheeses or more healthful or locally-sourced ingredients.”

Pointing out that 61% of consumers say they want to add more protein to their diet, Portalatin suggested that c-store retailers call out that attribute of their sandwiches. The same goes for the No. 2 attribute consumers want, which is whole grains, so it would be smart to leverage the use of whole wheat bread.

“Consumers are talking about eating healthy and want to feel good about purity, wanting ingredients that are all natural and less processed,” Portalatin said. “They want to feel good about what they’re eating.”

On the other hand, there is still great interest in old favorites. Within the convenience store segment, Portalatin pointed out, bacon, lettuce and tomato and breaded chicken sandwiches have experienced growth over the past year.

“Breaded chicken, for example, is not necessarily a growing category, but players in the marketplace who differentiate and execute it well have seen growth,” he continued.

In its 2019 SNAP Report on sandwiches, Datassential called out chicken as the most common variety

38 Convenience Store Decisions March 2019

34-46_Foodservice.indd 38

of sandwich on menus. The meat was included in 78.7% of sandwiches at foodservice operations.

Fast Facts: » Sandwiches are still the No. 1 U.S. food consumed at lunch.

HOT PROMOTIONS Fourteen year ago, Cubby’s convenience stores, which has 36 locations in Nebraska, Iowa and South Dakota, differentiated their hot sandwich offerings with the introduction of the “Junction Burger,” said company president De Lone Wilson. This item features wrapping a protein such as hamburger patty or chicken breast and toppings in pizza dough and baking it.

Junction Burgers are available in several varieties: cheese, double cheese, bacon cheeseburger, chili cheese and chicken cordon bleu. For the past couple of years, Cubby’s has done a lot of promotion to familiarize customers with the Junction Burger brand, resulting in increased sales.

To differentiate Cubby’s graband-go wedge sandwiches from its competitors', the stores bake their own white and wheat bread loaves and hoagie rolls.

“We’ll also heat up their sandwiches if they want,” Wilson said.

» Chicken is the most common variety of sandwich on menus.

The meat appears in 78.7% of sandwiches at foodservice operations.

Price promotions also sell sandwiches at Cubby’s.

“A couple of years ago, we realized that we were more worried about gross profit percentage instead of how many sandwiches we were selling,” Wilson said. “So, we did a two for $5 special and saw our sales rise, then we reduced the regular price of $3.99 to $2.99 and that seems to appeal to our customers.”

Sandwiches sell all day and night at Cubby’s.“A big percentage of our sandwich sales are after 9 p.m. when shift workers are looking for a meal and the bars close,” Wilson said.

WARMING TO SANDWICHES According to Nielsen, convenience store sales of frozen prepared sandwiches in the last two years have declined significantly as the popularity of ready-to-eat sandwiches has grown over the same period.

Sales of Prepared Sandwiches in the Convenience Channel Prepared Sandwiches (ready to eat)

52 wks ending at 01/02/16

52 wks ending at 12/29/18

% change in 2 years

$1.1B

$1.1 B

3.9%

Frozen Prepared Sandwiches

$76.4 M

$52.2M

-31.7%

Frozen Prepared Breakfast Sandwiches

$79.9 M

$44.1 M

-44.8%

Source: Nielsen Total Convenience Store Data, February 2019

cstoredecisions.com

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2/25/19 8:31 AM

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Foodservice

Roller Grill

Roller Grill Flaunts Flavor

F

resh hot dog and corn dog servings ordered at convenience stores were up 7% in the year ending November 2018 over the prior year, reported NPD Group research firm recently.

According to consultant and veteran convenience store expert Jerry Weiner, roller grill will continue to be an integral part of c-store foodservice programs because “it is the easiest fresh hot food available and a program that they can execute well in just about every configuration.”

The National Hot Dog and Sausage Council (NHDSC) reported that for the year 2018, nearly 900 million pounds of hot dogs were sold at retail stores, representing more than $3 billion in retail sales. New products in flavors such as honey and brown sugar, barbeque, Cajun, spicy and teriyaki have helped to drive those sales.

Dinner sausage sales last year were nearly 1.1 billion pounds, a 1.4% increase over 2017 with dollars spent exceeding $3.72 billion, NHDSC reported.

While the “variety” of products and flavor profiles back in the 1980s was limited to two items—hot dogs and Polish sausage—consumers today expect to find many more options, Weiner said.

“I’ve seen products in the very, very early stages of research and development that make me sure that the offering is going to change dramatically to fit new flavor profiles,” Weiner said. “That’s where we’re headed.”

Weiner pointed out that as far as toppings, the traditional condiment packets of mustard, ketchup and relish are no longer sufficient. He advises retailers to look at adding refrigerated self-serve wells or pumps of a variety of toppings to match the quality of the items on the grill.

Fast Facts: » In 2018, nearly 900 million pounds of hot dogs were sold at retail stores, representing more than $3 billion in retail sales. » “Two-fers” is usually the best promotional roller grill tool.

According to a range of consumers, who were recently surveyed by the research firm Datassential, hot dogs are universally craved. Men have the highest index (90) versus the norms in Datassential’s database, but other demographics graded very high on the hot dog scale as well.

WHO REALLY LOVES IT?

Normative indicates shown 50 = avg among group

Source: Datassential SNAP 2019 Report, January 2019

varieties, such as a four-cheese version, that allow the stores to “mix it up a bit without waste issues and problems for the managers,” Brown said. The LTOs change every two months and are called out on the grill with roller thimble signage.

TWO-FER TOOL Fastbreak stores also feature breakfast sausages on their When it comes to promotions, “a two-fer is the grills throughout the day and merchandise their egg rolls best tool to create trial,” at grillling sites.

Over the past year Brown has pared down the selection Weiner said.

Greg Brown, food and of roller grill items to better manage waste, but is considerbeverage manager at the ing adding back some roller bites that are popular.

Brown is also looking for the best space to fit a six-unit Fastbreak convenience chain, which includes condiment bar where the stores could offer fresh toppings 29 stores in Oregon such as jalapeños and sauerkraut. For the past year and a and Northern California, half, they have been using squeeze bottles in addition to agreed. The offer of two offering the traditional packets.

“We’re planning to do more training of everyone from hot dogs or Tornados for $3 makes his roller grills a our regional and area manager to the individual store regular stop for customers. employees, so they’ll know what items to put on at various So do the limited- times throughout the day and how much waste is accepttime-offer (LTO) hot dog able,” Brown said.

40 Convenience Store Decisions March 2019

34-46_Foodservice.indd 40

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Foodservice

Hispanic

Hispanic Foods

Offer Potential

W

ith Hispanics spending more than $94 million on consumer packaged goods, according to Chicago-based IRI, this is one food category that is ripe with potential in the convenience channel.

The growth of authentic-inspired foods such as empanadas can be seen in certain regions.

“We have found that market is growing,” said Paul DiPalma, director of operations and controller at Flory Corp., a convenience, gas and deli operation based in New York State, which has stores in Hopewell Junction, Mahopac and Fishkill. “We have a lot of landscapers and other workers (quickly passing through) that love to speed in and grab these quick, satisfying foods.”

According to IRI, the spending power for burritos and other Hispanic foods is expected to be tremendous.

According to a recent report from Chicago-based market research firm Technomic, 62% of consumers say they purchase ethnic or ethnic-inspired foods from restaurants and other foodservice locations at least once a month.

Rob Wilson, a Chicago-based partner and managing director at L.E.K. Consulting, agreed burritos and Hispanic foods continue to be a growth area for those c-stores with the right offerings.

“Overall, they are really on trend, and this is where the puck is moving,” Wilson said.

HISPANIC FOODSERVICE EVOLVING Though Hispanic offerings have made incremental gains in the convenience channel overall, Nielsen research data indicates that demand for certain selections like empanadas increased significantly in 2018, compared to 2017.

2017 $ Sales

2018 $ Sales

Handheld Items

$174.6 M

$176.3 M

0.90%

Burritos

$113.6 M

$109.6 M

-3.50%

Empanadas

$48.1 M

$49.6 M

68.60%

Quesadilla

$7.9 M

$13.4 M

-58.50%

$1.6 M

$665,544

3.20%

$256,183

$308,596

20.50%

Hispanic Fare

Tacos Tamales

1 -Year % Change

Source: Nielsen Total Convenience Store Data for the 52 Weeks Ending Dec. 29 2018; and for the 52 Weeks Ending Dec. 30 2017

A recent report by Mintel, which surveyed consumers by Fast Facts: age group, revealed a higher » Hispanics are spending ratio of Gen Z and Millennials more than $94 million on were seeking ethnic cuisine consumer packaged goods, compared with Gen X and baby according to Chicagoboomers. based IRI. “There is lots of momentum in general for Mexican foods,” » Breakfast options, singleserve packaging and inWilson said. “Where we’re seenovative ingredients are on ing growth and innovation is in trend in 2019 with burritos c-stores.” and Hispanic foods.

In particular, he said innovation is appearing in the grab-and-go case, on roller grills with taquitos and similar products and in the hot case.

“The hot case is where you’re seeing a lot of the growth, in particular,” said Wilson. “From a flavor standpoint, temperature is a key consideration.”

When it comes to prepared foods, quality and temperature go hand in hand. So retailers who can incorporate more hot burrito and Hispanic food offerings into their lineup will be ahead of the game.

Another trend as it pertains to burritos is ethnicity infusion.

“A burrito is historically a Mexican cuisine, but we’re starting to see other ethnic flavor profiles mixed in, such as Asian or Mediterranean, in restaurants,” said Wilson.

More so than vegetarian or vegan options, consumers in this space are seeking breakfast possibilities.

“This daypart continues to be on trend, with breakfast driving growth in prepared foods,” said Wilson. “We predict even more breakfast offerings in this segment, for 2019, with breakfast burritos at the forefront.”

He also foresees more single-serve offerings in the convenience channel similar to what’s available in supermarkets.

“Rather than six- or eight-packs, single-serve handheld burritos are easy to eat on the run and convenient,” Wilson said.

He predicts growth of healthier prepared food items in general as well as premium items with a higher price point.

“It’s important not to just focus on price point, because consumers are willing to pay for higher quality products and ingredients that cost more,” said Wilson.

2017

2016

2015

2014

2013

2012

2011

2010

cstoredecisions.com

2008

2007

2006

2005

2004

2003

2002

34-46_Foodservice.indd 42

2001

2000

1999

42 Convenience Store Decisions March 2019

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Foodservice

Bakery

Bakery Sales

Booming

I

n the International Dairy Deli doughnuts from $982 million up from Bakery Association’s (IDDBA) $957 million, bagels $192 million from “What’s In Store 2019” report $189 million and muffins $767 million Mintel research found that from $727 million.

Bread can be the centerpiece of among in-store bakeries in the U.S., sales growth continues a steady climb, a store’s bakery program because it shows a commitment to providing growing 3.5-4% annually.

The research firm predicted that the fresh products and going beyond the market will surpass $19 billion in sales commercially packaged fare, said Eric by 2022, a 40% increase over its 2012 Richard, IDDBA’s education coordinaperformance and 21% ahead of 2017’s tor. The bread can also cross categories bringing, for example, the freshness total sales.

In addition to providing indulgence message to the sandwich category.

A fresh doughnut program is also at any time of day, one category in which consumers are still willing to easy for most convenience stores to treat themselves is the breakfast day- implement, Richard said. By thinking part. Fresh bakery products offer an outside the box (for example, dougheasy and quick option for the morning nuts with sweet-and-salty toppings) and offering the highest quality items, conmeal, according to Mintel.

Kokil Singh, principal, client insights venience stores can effectively compete at IRI told IDDBA that “bright spots” on the same level as standalone bread within the category include bagels/ and doughnut shops, he pointed out.

“Pay attention to what’s going on bialys, pastries/doughnuts, pie and cakes, cookies—which he described as in independent bread bakeries and the biggest driver in sales dollars—and doughnut shops to get the pulse tortillas. Singh continued explaining on what consumers are looking for,” that the uptick in sales in the bakery Richard said. segment can be attributed to both “unit sales and higher average price per INDULGENT INSPIRATION unit, as well as diversifying assortment.”

Even with all the buzz about eatNielsen Fresh saw dessert category ing healthfully, consumers are still sales rising to $5.3 billion, up from willing to indulge when it comes to $5.2 billion the year prior. Cookies, bakery items, reported Tim Dysart, according to Nielsen, saw an increase vice president of Dysart Travel Stops, from $1.6 billion to $1.7 billion, which operates eight stores in Maine.

Products are baked at the chain’s main restaurant in Hermon, Maine and delivered daily to the stores.

Among the most popular bakery products are nine varieties of cook» In-store bakery sales could suries (especially pumpkin chocolate pass $19 billion in sales by 2022— chip which are available year-round), 21% ahead of 2017’s total sales. three kinds of whoopie pies, two types of brownies, cream horns and » Cookies provide one of the bighomemade bread, which is used on gest bakery sales boosts. sandwiches as well as sold as loaves.

Fast Facts:

44 Convenience Store Decisions March 2019

34-46_Foodservice.indd 44

BAKED SALES RISE In the 52 weeks ending July 21, 2018, fresh and perishable foods generated more than $177 billion in retail sales, according to Nielsen’s Total Food View report. Growth in most bakery segments reflected a positive compound annual growth rate (CAGR) during the period. $ CAGR

Unit CAGR

Total Bakery

2.4%

1.7%

Desserts

3.0%

7.5%

Cake

2.3%

4.9%

Pies

3.7%

18.1%

Cupcakes

3.4%

2.1%

Brownies

8.1%

4.9%

Specialty

4.4%

3.4%

Party Platter

-1.0%

-3.0%

Other

6.0%

1.6%

Cookies

5.5%

-2.4%%

Rolls & Buns

-0.7%

-1.0%

Sweet Goods

1.4%

-1.3%

Doughnuts

0.4%

-1.1%

Muffins

6.6%

4.7%

Bagels

-0.7%

0%

All Other

34.6%

25.6%

Source: Source: International Dairy Deli Bakery Association’s What’s In Store 2019 Bakery Sales and Eating Trends; Nielsen eXtended All Outlet Combined, Total Food View, 52 Weeks Ending July 21, 2018

Cookies are packaged in quantities of seven for grab and go. The other items are packaged individually.

Dysart said he expects bakery sales to continue to grow because “we have products that are a little different from what you’ll see anywhere else.” In addition to its regular assortment, the stores feature cookie limited-time offers that rotate roughly every other month. cstoredecisions.com

2/26/19 12:27 PM

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Foodservice

Hot Dispensed

Coffee: Quality Differentiates

S

ixty-four percent of Americans said they drink coffee daily, according to the National Coffee COFFEE NOT JUST BEANS Association U.S.A.’s (NCA) “National Coffee Trends spurred by Ameican coffee drinkers grew even more Drinking Trends 2018” report. robust in 2018. Among some unique items noted in a report And, with coffee accounting for around 20% of conve- by the National Coffee Association, 48% of Millennials drink nience store foodservice sales, it pays retailers to treat it gourmet coffee beverages daily. as the key category that it is, said John Benson, a director in the restaurants, hospitality and leisure practice at AlixPartners LLP, a business consulting firm.

“It is especially important for retailers to have a fresh and high-quality coffee program in place to support the breakfast daypart,” Benson said. “In a recent survey, 75% of consumers said they drank coffee in the morning.”

In the recent AlixPartners’ survey, 16% of respondents said that c-stores make sense for breakfast. That means, Benson noted, there is a lot of opportunity for growth in that daypart for c-stores.

Aside from coffee, hot chocolate is a breakfast staple, while hot tea programs are beginning to percolate across more chains.

QUALITY PERCEPTION “Quality used to mean simply freshness, coffee that was brewed within the past hour or so,” Benson said. “But now consumers are savvier, more sophisticated. To them, quality means knowing the beans’ countries of origin, if they are single origin or, if Arabica, what variety of Arabica.”

Thirty-seven percent of respondents aged 18-24 and 48% aged 25-39 in the NCA report said they drank a gourmet coffee beverage (defined as traditional coffee brewed from gourmet beans) yesterday.

Ga ining consu mer trust is the most effective » 37% of respondents aged way to build a retailer’s Source: “National Coffee Drinking Trends 2018” National Coffee Association U.S.A. 18-24 and 48% aged 25-39 foodservice business, in a NCA report said they starting with coffee, said drank a coffee beverage in Jeff Keune, senior vice plenty of opportunity to customize their coffee with flathe past 24 hours. president of food service vored syrups and creamers.”

To get patrons in the habit, the chain is strongly proand innovation at Yesway » Coffee accounts for C o n v e n i e n c e S t o re s moting it by offering any size cup for 89 cents. Loyalty around 20% of c-store which has 150 locations card users can participate in Yesway’s Coffee Club, which foodservice sales. enables them to earn a free cup when they buy five. in nine states.

“Once we get them in the door, we can focus on building “Instead of brewing five or six varieties of fla- their baskets,” Keune said.

AlixPartners found that about one-third of respondents vored coffees like we used to do, we now are focused on the basics, offering a maximum of three—our house blend, in their study said they order coffee from a drive-through. breakfast blend and decaf—and brewing fresh pots more NCA revealed that 24% of consumers order coffee through often,” Keune said. “At the same time, we give customers an app each week.

Fast Facts:

46 Convenience Store Decisions March 2019

34-46_Foodservice.indd 46

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Beverages

Carbonated Soft Drinks

Adding

I

Fizz to CSDs

t has not been an ability and purchases of zero- and consider those brands that execute easy road lately reduced-sugar beverage choices in well as a destination.”

He predicts the trend toward diet/ for carbonated convenience stores across the country.

Nearly half of convenience store low-calorie carbonated beverages will soft drinks (CSDs) in the convenience customers state their primary reason continue as well as healthier options, but channel as consumers to go into a convenience store is to consumers will not compromise on taste. seek healthier bever- purchase a beverage, according to a recent NACS survey. age options.

“Customers seek out bevCSDs are still the most popular FRUITFUL MOVEMENT and profitable segments in the indus- erages when they come to FOR CSD BRANDS try. Now, there is a push to introduce convenience stores,” said Jeff healthier carbonated beverages given Lenard, vice president, strateKnown for its sparkling water, gic industry initiatives, for NACS. this shift in demand.

San Pellegrino also makes an Italian soda Evidence of this is the Alliance “More than half (53%) say that a called chinotto. Internatioanal beverage brands like San Pellegino and Jarritos have for a Healthier Generation and the beverage purchase was the pribeen making waves in the U.S. carbonated Partnership for a Healthier America mary reason they went inside the soft drink market—some marking a fourfacilitating collaboration between store to make a purchase, comyear period of triple-digit growth. the American Beverage Association pared to 20%, who said they (ABA) and the National Association of went inside to purchase food.”

FASTEST GROWING Convenience Stores (NACS) to reduce CSD BRANDS sugar consumed from beverages by AUTHENTIC CHOICES RANKED BY 4-YEAR GROWTH providing heathier beverage choices.

Aside from the introduction Working with the Alliance for a of lower-calorie or zero-calorie 2018 4-Year Healthier Generation, the ABA along sodas such as Coke Zero, CSDs Pentatration Growth with America’s leading CSD com- are being augmented by interMist Twst 2% N/A panies—Coca-Cola, Dr Pepper and national, fruit soft-drink brands, Seagram’s -1% +200% Pepsi—in May 2015 set a goal to which place a greater emphareduce beverage calories consumed sis on the use of unrefined sugar.

San Pellegrino 3% +150% per person nationally by 20% by 2025. Brands such as San Pellegrino, Squirt 1% +144% Beverage manufacturers and Jarritos and Izze are beginning retailers will be working together to to grab more cold vault space in Mexican Coke 3% +118% drive awareness and increase avail- convenience stores.

There’s a continued desire for Schweppes -1% +62% drinks that offer a good value Abita 1% +46% for the money in the CSD category, said Jeff Keune, senior vice Fanta 11% +38% president of foodservice and » Working with the Alliance for a innovation at Des Moines, IowaHealthier Generation, America’s Jarritos 3% +29% based Yesway, which has at least leading beverage companies preRamune 1% +29% 150 stores in nine states. viously set a goal to reduce bever“There is a consumer desire age calories consumed per person Caffeine Free 1% +21% for quality, flavor variety, connationally by 20% by 2025.

Diet Coke venience (speed, easy access, Coke Zero 8% +18% no wait) all for a low price,” » More than half (53%) of c-store Keune said.

“The category is customers say that a beverage Izze 1% +16% absolutely a traffic driver and purchase was the primary reason brand enhancer for the conthey went inside the store to make Mellow Yellow 1% +12% venience store industry, and a purchase.

Source: Datassential Non-Alcoholic Beverage Keynote, October 2018 consumers will continue to

Fast Facts:

48 Convenience Store Decisions March 2019

48-56_Beverages.indd 48

cstoredecisions.com

2/26/19 2:19 PM

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Beverages

Cold & Frozen

Cold, Frozen Drinks

Eclipse the Mark

A

c c o r d ing to the National Association of Convenience Stores’ (NACS) State of the Industry report published last year, cold dispensed beverages comprised 7.3% of total foodservice category sales in 2017, while frozen dispensed beverages encompassed 4.7%.

Cold dispensed beverages generated sales of $3,663 per store, per month, while frozen dispensed beverages accounted for sales of $2,357 per store, per month.

Riding this wave, La Crosse, Wis.based Kwik Trip’s 625 stores recently installed Fresh Blends’ self-serve equipment, producing fruit smoothies, cold-brewed drinks and shakes.

“We worked with the company for a couple years to get it up and running,” said Paul Servais, Kwik Trip’s retail foodservice director. “This selfserve frappe and smoothie machine makes real fruit smoothies and frozen coffee drinks.”

Guests select what they want from an interactive screen and the machine automatically produces it using dual blades and blend-in-a-cup technology.

“This was the one missing piece of our cold fountain offering,” said Servais.

SMOOTHIE TRANSITION Since the program began early this year, fresh smoothies and frappes are already 25% of cup sales.

Fountain comprises 56% of the cold beverage category. Fresh smoothies and frappes now comprise 40% of sales dollars, compared with fountain, 50 Convenience Store Decisions March 2019

48-56_Beverages.indd 50

which is 41%. And fresh smoothies and frappes are 54% of gross profit dollars for the category, compared to fountain at 28%.

Prior to the program, Kwik Trip offered shakes and slushies, but there was a need for frozen coffee and highquality smoothies at its stores.

“We found that people want to see these products being made, so they know it’s fresh and what they’re getting, and this machine delivers that,” said Servais.

Kwik Trip has discovered that from a cup and dollar standpoint, these products have a better ring and may even surpass fountain revenue.

“Even early on and during winter,

DEMAND FOR SMOOTHIES UP More and more, smoothies are becoming part of the cold and frozen category as consumer demand for fresher ingredients increases. In a recent beverage report, Datassential examined the most menued smoothie ingredients and flavors in 2018.

The top seven ingredients are fruit-based.

MOST MENUED SMOOTHIE INGREDIENTS & FLAVORS RANKED BY PENETRATION

2018 Pentatration

4-Year Growth

Strawberry

78%

+2%

Banana

65%

+5%

Mango

57%

+9%

Pineapple

37%

+13%

Berry

34%

+3%

Blueberry

28%

+16%

Orange

25%

-9%

Source: Datassential Non-Alcoholic Beverage Keynote, October 2018

Fast Facts: » According to NACS’ State of the Industry report, cold dispensed saw sales of $3,664 per store per month in 2017. » Kwik Trip has seen beverage sales soar with shakes, fruit smoothies and, cold-brewed drinks and shakes. our stores are doing 100 drinks a day out of this machine, and some stores are serving 200 of these beverages daily,” said Servais.

He added for Millennials and Generation Z, frozen dispensed is the fastest growing beverage outside of dispensed frozen carbonated.

“We’re late in the game, but these self-serve machines keep labor down and allow us to sell a lot of quality drinks,” Servais said.

As for trends, many are reflective of the food category overall.

“Many items that come to c-stores get there because they have caught on in other parts of our lives,” said Daniel Levine, director of the Avant-Guide Institute.

With the popularity of cold-brew coffee rising exponentially, and now on tap at any number of coffee shops, it is a good fit for c-stores with the convenience and price-point factors.

“Several companies are now selling bag-in-box cold-brew coffee for home consumption, and this is exactly the way that c-stores that are not already riding this trend can benefit from it with ease,” said Levine. He also salutes 7-Eleven Cap’n Crunch Berries Slurpee as a breakfast option. cstoredecisions.com

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Beverages

Juices & Teas

Figuring Juice and Tea Sales

E

arly last year, 7-Eleven stores introduced organic, TEAS, JUICES SKID AMONG BEVERAGES cold-pressed juices as part of Among the major beverage segments in the c-store channel, there was a decline its GO!Smart private brand. in sales across the board in 2018, except for sparkling water. Specifically, sales of Produced from whole fruits and vegliquid tea dropped 3.5% to $1.483 billion. Comparably, fruit juice declined 2% to etables, the varieties include Clean $671 million. & Green with kale, cucumber, apple, spinach, mint, celery, lime and parsley.

2017 2018 1-Year % 2018 Unit With all things international mak$ Sales $ Sales Change Sales ing waves in many food channels, tea trends in c-stores have followed suit.

Soft Drinks $7.76 B $7.57 B -2.5% 1.1 B Packaged Facts’ report “U.S. Beverage Market Outlook 2018” noted four tea Regular Water $2.32 B $2.29 B -1.2% 465.4 M trends are expected to drive growth in Liquid Tea $1.54 B $1.48 B -3.5% 278.3 M this country’s tea market over the next Fruit Juice $685 M $671 M -2.0% 107.6 M four years, including matcha, moringa, Sencha and mizudashi, which is cold Sparkling Water $176 M $203 M 14.9% 71.5 M pressed tea.

Although still robust, the juice cate- Vegetable Juice $56 M $51M -9.5% 54 M gory dipped 0.9% in 2017, according Source: Nielsen Total Convenience Store Data for the 52 Weeks Ending Dec. 29, 2018; and for the 52 Weeks Ending Dec. 30, 2017 to a report from Beverage Digest.

As for tea, it is consumed by more than 158 million Americans daily, according to the Tea Association of Chicago-based market research firm.

“I think when it comes to juice, “From a consumer standpoint, the many customers reading the labels the U.S.A. Refrigerated ready-to-drink teas generated more than $1.36 billion search is for ‘healthy’ alternatives are scared by the sugar content and in sales at U.S. multi-outlets for the 52 to ‘sugary’ drinks,” said Terri-Lynn moving over to water,” said Melissa weeks ending May 20, 2018. That’s Woodhouse, who runs the train- McPherson, NOCO’s category manan 8.3% increase compared with the ing company Ultrability in Ontario, ager. “As for the iced tea, we are prior-year period, according to IRI, a Canada. “With that, chains are react- seeing some tea drinkers moving over ing by offering all-natural and organic to kombucha.” options for the customers. It’s a great As for flavors, there has been an thing because not only does it give the increase in hibiscus, passionfruit and consumer a greater variety to choose pineapple tea varieties over the past from, it offers c-stores as an alterna- year, and unsweetened continues to » Refrigerated ready-totive to the high-end coffee/tea/juice sell well, she said. drink teas generated more bar chains.”

“Arizona moved from the bubble than $1.36 billion in sales at C-stores are also partnering with top 34-ounce bottle to a taller traU.S. multi-outlets. local ‘small batch’ companies to offer ditional bottle, which makes it look products made locally. larger in volume,” said McPherson. » Packaged Facts identifies Juices have been capitalizing on healthier ingredient profiles, as is SUGAR ALTERNATIVE four tea trends it expects NOCO Energy Corp., which has 39 evidenced by Tropicana’s recent introwill drive growth in the U.S. locations in western New York, saw rel- duction of Tropicana Kids, as well as tea market over the next atively fl at juice and tea sales over the its new Tropicana Coco Blends, which four years. includes a splash of coconut water. past year.

Fast Facts:

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March 2019 Convenience Store Decisions 51

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Beverages

Bottled Water & Sports Drinks

Bottling Up 2019

Water Profits

A

s consumers continue seeking healthy bever- sports drink sales in convenience stores. Bottled water flaages bottled water and sports drinks have come vors are tapping into this beverage demand.

“While Powerade has now carried Powerade Zero for to reflect the latest in cleaner labels, amino acida while now, 2018 is the first time Gatorade introduced added and mineral-infused beverages.

Bottled water was the top beverage in the U.S. by vol- a zero-sugar sports drink, Gatorade Zero,” Jaeger said. ume in both 2016 and 2017, respectively, growing by 7% “While at The PRIDE Stores, Gatorade is still one of our top in 2017, with 13.7 billion gallons consumed according to sellers, it definitely has some competition outside of its own the International Bottled Water Association (IBWA) and the market with beverages like Neuro and even the water market has taken a few cues from the sports drink category.”

Beverage Marketing Corp. (BMC).

In water, the category began with purified brands, then Data from Persistence Market Research indicates the bottled water industry is projected to top $22 billion by the moved to fruit flavors as an alternative to soft drinks. end of 2024.

Comparably, the flavored-seltzer market is growing by more than BREAKING DOWN BOTTLED WATER 10% annually, with the top five The most appealing bottled water attributes to consumers brands—Sparkling Ice, LaCroix, are some of the most basic, like spring water, vitamin Perrier, San Pellegrino and Polar— enhanced and mineral water. In its latest Bottled Water » The bottled water now accounting for $1.2 billion in Executive Summary, Mintel asked 2,000 internet users industry is projected to yearly sales, according to research aged at least 18: “Which of the following attributes are top $22 billion by the group IBISWorld. most appealing to you when choosing a bottled water to end of 2024, according “At McLane, branded bottled buy? Please select up to three and rank them in order of to Persistence Market importance.” The rankings are shown below: water has grown approximately Research.

4% year-to-date in consumer 46 Spring 29 units and dollars,” said Michael » The flavored-seltzer Carlson, merchandising manager 27 market is growing by Vitamins 11 at McLane. “Historically, we have more than 10% annually, seen water grow 9-10% year over 23 according to IBISWorld.

Mineral 7 year, and we will continue to see steady growth in this category for 22 Purified 10 the foreseeable future.”

18 The growth in bottled water is attributed to the healthier Antioxidants 6 preferences that consumers are moving toward along with 17 the convenience factor, Carlson added.

Distilled

Fast Facts:

7

SETTING SALES In the convenience channel, it’s the traditional sports drinks and bottled water varieties that continue to prevail.

“Gatorade has still been able to maintain its popularity, despite seeing more and more competition in the sports drink market,” said Nicolette Jaeger, loyalty and food service manager at The PRIDE Stores Inc., a 12-store chain based in Warrenville, Ill. “Competitors like vitaminwater and Powerade have definitely made an indentation in the market, forcing Gatorade to reinvent itself.”

The competition in the category as well as scrutiny about sugar content have made the climate more challenging for 52 Convenience Store Decisions March 2019

48-56_Beverages.indd 52

Probiotic

3

Protein Enhanced

8

2

Alkaline

2

Caffeinated

1

0

Any Rank

7

3

Oxidized

9

Ranked most appealling (1)

5

3

10

20

30

40

50

Source: Lightspeed/Mintel February 2018

cstoredecisions.com

2/26/19 2:41 PM

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Beverages

Beer & Adult Beverages

Adult Beverages Remain Strong

C

onsumers continue to look for beer, wine and other adult beverages at c-stores, and that is not expected to change in 2019.

“We think 2019 will continue to see an expansion for wine in the convenience channel, particularly in higher-price tiers, as consumers continue to trade up to higher quality wines,” said Eric Schmidt, director of alcohol research for Beverage Marketing Corp.

For the bigger beer segment, Schmidt and his colleagues are seeing a shift taking place among the younger, more health-conscious segment of the market.

“They seek lower-alcohol, simple beers and lower-calorie hard seltzers that are prevalent in the channel,”

Schmidt said.“We’re also seeing a shift toward alternative packaging like canned wines, which are perfectly suited for convenience.”

This past January, Bud Light courted the more health-conscious segment of the market by becoming the first U.S. beer to feature a comprehensive onpack serving facts and ingredient label for products that hit store shelves in February. Besides listing the ingredients, its packaging includes serving size, calories, total fat, saturated fat, trans fat, carbohydrates, sugars and protein.

Of the top 10 merchandise categories in the convenience store channel, beer ranks third with per store/per month sales of $16,901, with gross profit dollars of $3,853 in 2017, according to National Association of Convenience Stores’ (NACS) State of Industry report.

BEER SALES SHIFT Looking at the top six, best-selling beer brands in the convenience channel, domestic brands such as Bud Light have lost ground to craft brews and popular Mexican beers, including Modelo Especial. One exception to the trend, however, is Michelob ULTRA.

Top Six Pack

$ Sales

1-Year % Change

$ Share of Category

Total Beer Sales

$19 B

1.20%

100%

Bud Light

$3.48 B

-6.00%

18.14%

Coors Light

$1.26 B

-4.40%

6.56%

Budweiser

$1.24 B

-4.00%

6.43%

Modelo Especial

$1.13 B

19.90%

5.87%

Miller Lite

$1.11 B

-2.20%

5.76%

Michelob ULTRA

$1.03 B

16.30%

5.39%

Corona Extra

$997 M

2.1%

5.19%

Source: IRI, a Chicago-based research firm, U.S Convenience Store All Scan Data for the 52 Weeks Ending Dec. 30, 2018

54 Convenience Store Decisions March 2019

48-56_Beverages.indd 54

Fast Facts: » More convenience consumers are seeking higher quality wines. » Bud Light introduced serving facts and ingredients on labels in February.

BEVERAGE PIE Meghann Eaton, category manager for VERC Enterprises Inc. in Duxbury, Mass., reported that 2018 was a good year for beer and wine across the c-store chain.

“Even though the biggest piece of the beer pie—domestics—was slightly down, we saw great growth in rotating local craft (10%), malted beverages, the seltzer families (17%), and imports (12%) with Corona, Heineken and Modelo.” Wine’s growth at VERC was a result of what Eaton called the boom in rosé, with 44% of sales, and the growth in whites, now 14%.

VERC’s leading brand in beer is Budweiser, but the brand with the highest growth is White Claw seltzers. The chain’s leading wine brand is Sutter Home, while the brand with the most growth was from Cupcake Vineyards.

For beer, Eaton expects to see domestic growth level off, craft continue to grow and overall growth in all segments. “Since beer cost keeps rising, they are making craft retails look more appealing, and not so shocking.”

Beyond 2019, futurist and trends forecaster Barry Minkin predicted beer will decline for middle-class, bluecollar Americans. “Health trends will also negatively impact sales. Growing Hispanic immigrants will, however, provide moderate growth for Mexican beers.” cstoredecisions.com

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Beverages

Energy Drinks

Energy Drinks

Expand Forward

A

mericans aren’t about to slow down, so expect sales of energy drinks to continue to speed up.

“The energy drink category has continued on a solid growth path,” according to Gary Hemphill, managing director of research for Beverage Marketing Corp. (BMC) in New York City. “It is dominated by the category stalwarts Red Bull and Monster. The c-store channel is the star sales channel for energy d r i n k s ; i t ’s a category that’s been built on » Red Bull and Monster still dominate this ever immediateexpanding category. consumption sales, which » Consumers thirst for i s t h e functional, organic, strength of natural ingredients. convenience stores.”

Hemphill added that he has seen a good deal of innovation in the category, with brands like Bang gaining positive traction.

“Soft drinks are often consumed as an accompaniment to food, and therefore many categories depend on the prominence and strong performance of foodservice destinations and consumption locations,” said Jonathan Davison, consumer analyst for integrated research firm GlobalData. “This is not the case with energy drinks, and the category owes much of its sustained growth in the U.S. to rapid gains in the convenience channel, as consumers continue to seek energy boosts.”

Fast Facts:

HOLDING SHARE The convenience channel’s share of energy drinks has fractionally dipped in the last five years as the likes of dis56 Convenience Store Decisions March 2019

48-56_Beverages.indd 56

“We continue to see the two big count stores and supermarkets expand their category footprint, Davis con- energy brands on the East Coast continued. “The overwhelming array of tinue to grow,” said Mike Jackson, brand variants on offer particularly favor category manager for High’s of supermarkets given the much larger Baltimore. “Innovation seems to be shelf space available, but convenience the key for these leaders to continue to stores can claw back the advantage by grow year after year. Some of the older targeting specific on-trend beverages brands are starting to decline in sales and there are always new brands trythat tap into current demand.”

Davison said customers today are ing to break into energy all the time.”

High’s had a more than 12% sameshifting to brands that offer more functional, organic and natural ingredients. store-growth rate in unit sales of As is the case with specialty beer, new energy drinks in 2018.

“The two big players, Monster and flavor variants are emerging in energy drinks, reflecting a demand for new Red Bull, both showed impressive growth in both unit and dollar sales,” tastes and experiences.

Another growing phenomenon is Jackson said.

The lines between energy and cofenergy drinks made from hemp oil or seeds. Brands like Canna Hemp fee, as well as energy and water, are Energy Drink, Cannabis Energy Drink, also becoming blurred, Jackson sugRocky Mountain High Natural Hemp- gested. New brands and extensions Infused Energy Drinks, Hemp Energy of existing brands are producing new Drink and others are promising not products all the time trying to offer just energy, but colon cleansing and more attributes to a customer in a single product. reduced cravings for sugar.

CREATING NEW CATEGORY ENERGY Innovations like Red Bull’s Total Zero line, Monster Energy Absolutely Zero and Rockstar’s Pure Zero have generated new consumer demand within the energy drink category, making those companies top manufacturers. $ Sales

1-Year % Change

$ Share

Total Energy Drinks Non-Aseptic

$8.20 B

8.10%

100.00%

Red Bull North America Inc.

$3.523 B

5.50%

43.02%

Monster Beverage Corp.

$3.07 B

11.00%

37.47%

Rockstar Inc.

$688 M

-2.90%

8.40%

High Performance Beverage.

$378 M

5.60%

4.60%

Vital Pharma Inc.

$198 M

400.10%

2.42%

Top Energy Drink Brands

Source: IRI, a Chicago-based research firm, U.S Convenience Store All Scan Data for the 52 Weeks Ending Nov. 4, 2018

cstoredecisions.com

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Beverages

Energy Shots

Adding Spark

to Energy Shots

5

-hour Energy continues to anymore. It started slowing down ENERGY SHOT SALES dominate the conveneince cat- about two years back.”

STILL LOSING STEAM egory with a nearly 93% share Energy shots sales in 2018 remained relaof the category in 2018 despite REPLICATING SUCCESS tively flat as 5-hour Energy continued to sales, which totaled $699.5 million, Taking into account the loss dominate share, accounting for more than dipping 0.4% from 2017, according to of momentum of energy shot 92% of overall sales in convenience stores IRI, a Chicago-based research firm. sales, Steve Nachwalter, princilast year. In the same period, sales of private Overall, the nearly $700-million pal of the Nachwalter Consulting label shots dropped more than 15%. segment saw a 0.8% decline last year, Group in Las Vegas, said conveaccording to IRI. This is due in part nience stores would do well to 1-Year % Energy Shots $ Sales to some consumers switching from emulate the successful efforts Change shots to functional sports nutrition of other retailers who are havCategory Total $699.5 M -0.8% drinks that contain ingredients such as ing success selling energy shots, branch chain amino acids (BCAA) and especially 5-hour Energy.

5-hour Energy $647.9 M -0.4% creatine.

“They can look at what 5-hour Tweaker $19.8 M 6.5% Flat sales aren’t foreign to Hamid Energy is doing and just repliRezaeepour, director of marketing and cate it,” Nachwalter said. “5-hour Rhino Rush $7.9 M 0.5% merchandising for Gardena, Calif.- is the top, top guy. Where do Private Label $6.5 M -15.3% based United Pacific, a retailer that they place in every convenience includes 320 company-operated gas store? On what displays? In what Vital 4u Screamin $2.9 M -3.1% stations and convenience stores, and sections, or what part of the Source: IRI, a Chicago-based research firm, U.S Convenience Store All Scan 55 fee-operated and leased locations. front? Are they next to gum, or Data for the 52 Weeks Ending Dec. 30, 2018.

“The energy shots category has are they next to chicken wings? been kind of stagnant and not mov- You’ve got to run all of that and ing,” Rezaeepour said. “It’s been then replicate their identity.” slowing down for a while.”

C-stores can look at product place- a principal of Black Monk Consulting In the Midwest, Ken Patel, an ment at competing retailers, including in Detroit.

More interest is being paid to 11-store, Schaumburg, Ill.-based from other channels.

7-Eleven franchisee and former presi“They should look and see what CBD—a non-intoxicating compound dent of the 7-Eleven Franchise Owners other stores are doing—where does found in cannabis plants, Mathews said.

Association of Chicagoland, is a pro- Walmart place it; where does Target “A wide range of traditional categories ponent of energy shots, calling the place it; where does the 7-Eleven place from cosmetics to skin care and bevercategory fairly stable. At the same it—and replicate those,” Nachwalter ages are finding new life by jumping on time, he admitted, “It is not growing said. “If you notice that Walmart, the CBD bandwagon, so why should Target and 7-Eleven all energy drinks be an exception?”

Interestingly, the category may have the same pattern.

Why would you reinvent receive a shot in the arm with the arrival of products that incorporate hemp. that pattern?”

“While energy shots For example, the Hemp Energi shot— » The segment in convenience stores are starting to mature as a two-ounce product containing hemp still has plenty of energy to grow sales. a category, the change in oil and eight nutrients—launched test the legal status of CBD in pilots in San Diego, Calif. and Miami, » 5-hour dominates the convience many states may breathe Fla. during the second half of 2018, channel with 93% market share. new life into this cate- and is reportedly available in more gory,” said Ryan Mathews, than 1,000 outlets.

Fast Facts:

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Snacks

Salty Snacks

Banking on

Salty Snacks

B

etween 2013 and 2018 annual purchases in the customers who bought snacks U.S. potato chip market grew from $8.5 billion to in c-stores grew to 36% from $9.6 billion, according to research firm Euromonitor 31% between 2014 and 2017, and is projected to increase to International. » Percentage of cusIf there is a change afoot, it may be customers’ increasing 37% in 2019, according to Jeff tomers who buy snacks preference for spicier-flavored chips, as well as good-for- Lenard, vice president, strainside convenience you chips made from vegetables, black beans, chickpeas, tegic industry initiatives for stores during stops to lentils and other healthy ingredients not traditionally found the National Association of pump gas is projected Convenience Stores (NACS). in snack chips. to rise to 37% in 2019.

Salty snack sales are expected to continue increasing, topping $13.6 billion by 2021, Mintel research indicated. Aside EXPERIMENTAL » Salty snack sales are from a growing variety, the overall sales growth in the salty CONSUMPTION expected to continue snack category is expanding through the introduction of At Zarco USA stores in increasing, topping popcorn, followed by cheese snacks and corn snacks.

Lawrence, Kan., CEO Scott $13.6 billion by 2021.

Ready-to-eat (RTE) popcorn is a rapidly growing salty Zaremba sees customers snack option due to its convenience, healthy halo and over- increasingly trying out new all category innovation, Mintel reported. chip flavors. “A lot of our cusChips are likely benefiting from the growing tendency tomers are asking for spicier of customers to buy snacks at c-stores. The percentage of chips, and ones with more flavor and different spices.”

“They’re trying them, and then going back to their standard, then trying the next new one that comes out. They might try Doritos Lime, go back to Nacho Cheese, and try SALTY SNACKS ADVANCE SALES the next flavor introduced,” Zaremba said. “They’re searchThe salty snacks category remains a robust performer in ing for flavorful chips, asking for them, perusing the aisles. It the convenience channel, with almost every segment in will be interesting to see what becomes the new standard.” the category growing annual sales in 2018.

Frito-Lay chips are No. 1 at Zarco USA stores. A Lay’s 1-Year plant stands about 20 miles away, so that leading brand is a $ Sales % Change natural for Lawrence-area stores, Zaremba said.

Salty snacks are always merchandised near the beer Category $5.3 B 7.2% cooler in the back of the stores. “But we’ve begun moving Salty Snacks $5.6 B 5.20% them to non-traditional places, to see if we can introduce new sales for this grab-and-go item,” Zaremba said. “In the Potato Chips $1.7 B 2.40% chip world, there is always something new, and when there Tortilla/Tostada Chips $1.1 B 10.90% are introductions of new products, new labels and new items, we like to have them at the front of stores to make Other Salted Snacks (no nuts) $912 M 6.00% them look fresh and ever-changing. We’ll have them in mulCheese Snacks $733 M 7.20% tiple places within the store.”

More convenience chains are seeing success with their Corn Snacks $392 M -0.30% own private-label salty snacks. Yesway, with 150 stores in nine Pretzels $244 M 1.70% states, recently introduced a new private-label line. 7-Eleven also has an extensive line of private-label chips. Lenard said Ready-To-Eat Popcorn/ $235 M 3.50% such innovations allow a chain to focus more on value-added Caramel Corn opportunities and have more latitude to tell a brand story.

Pork Rinds $218 M 6.80% Chips are a natural item for cross-merchandising. Zarco USA stores have cold and hot grab-and-go selections, and Source: IRI, a Chicago=based Market Research Firm, U.S. Convenience Store All Scan Data for the 52 Weeks Ending Dec. 30, 2018 chips are merchandised along with those items.

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Fast Facts:

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Snacks

Meat Snacks

Meat Snacks

Get Hearty

C

ustomers of convenience stores, like Americans overall, love salty snacks. And meat snacks continue to rule the salty segment, according to the 2018 salty snack market report by the Mintel Group.

In the report, “Salty Snacks US - March 2018,” meat snacks comprise 30% of the entire salty snacks category.

Moreover, meat snacks are also the fastest-growing segment of the salty snacks category, Mintel reported. Their rapid growth is being propelled by the increase in snacking, reflected in salty snacks’ sales growth from $2.471 to $3.588 billion yearly between 2012 and 2017.

“As the protein trend continues, meat snacks remain a driving force in convenience stores, with continued growth year over year,” said Dawn Letson, a merchandising manager at McLane. “Sticks are showing modest growth at 1% over last year, while jerky is still the driver, up over 4%.

Notably, most of the growth in jerky is in the big segment, meaning 10-ounces and above. Gone are the days of keeping retails below $9.99 in c-stores. Consumers now see the value in the bigger bags and have no problem paying the higher price for a better value, making these higher price point items a ‘must have’ in almost every set.”

JERKY SELLS That broader spectrum of names is readily seen at the Signal Food Stores of Ozark, Mo.-based Scrivener Oil Co. The chain of Southwestern Show Me State retail outlets offers national favorites Jack Link’s, Old Trapper and Cattleman’s Cut. Local Missouri brands, such as Cedar Creek and Pa pa’s Beef Jerky also sell well. In beef sticks, the chain sells Slim Jim, as well as Missouri brands Frickenschmidt and Pearson Ranch.

The latter is a line of exotic meat jerky made from buffalo, wild boar and elk.

The chain caters to a disproportionately young male

Fast Facts: » Only one in three consumers report having purchased meat snacks in the last three months, meaning there is room for even more robust growth. » The popularity of meat snacks has led to increased numbers of brands and flavors entering the market.

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GENERATING MEATY RETURNS The top seven selling jerky brands in c-stores last year accounted for 70% of total dollar share, according to Chicago-based IRI. Jack Link’s enjoyed the largest share of sales as well as the largest percentage versus 2017 with its Legend line.

$ Sales

1-Year % Change

$ Share

Category

$710 M

2.70%

100.00%

Jack Link’s

$299 M

4.90%

42.05%

Old Trapper

$85 M

18.80%

12.00%

Private Label

$32 M

58.00%

4.52%

Tillamook Country Smoker

$27 M

18.10%

3.86%

No Man’s Land

$20 M

30.40%

2.77%

Jack Link’s Legend

$17 M

198.20%

2.46%

Oberto

$17M

1.00%

2.34%

Source: IRI, a Chicago-based research firm, U.S Convenience Store All Scan Data for the 52 Weeks Ending Nov. 4, 2018

demographic, among them construction workers and overthe-road truck drivers plying U.S. 60 through southwest Missouri. To encourage meat snack sales, jerky and beef sticks are merchandised near the stores’ cold vaults. “We have a good margin on it, so we want people to see it,” said Sean Bumgarner, Signal Food Stores’ vice president.

Customer preferences have not changed much over the years, Bumgarner said.

“The traditional flavors in the original beef jerky have always tended to do well,” he said. “But we do pretty well with the spicy jerkies. We have a fair number of Hispanic customers who would go for a spicier flavor or exotic meat jerky [from Pearson Ranch].”

Signal Food Stores’ meat snack sales are mirroring beer sales in one important way. Customers are more willing to experiment with locally-made, innovative products.

Two-for-one promotions are offered on beef sticks about three times a year. Also featured are cross-promotions, such as a Frickenschmidt for a quarter with a soft drink purchase.

“But we promote beef jerky no more than once a year,” Bumgarner said. cstoredecisions.com

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Snacks

Snack Bars

Healthy Outlook for

Snack/Cereal Bars

I

ncreased snacking trends and consumers’ busy lifestyles are transforming the traditional breakfast to a more on-the-go eating occasion, opening the door to increased opportunity for innovation in the snack bar sector.

For 2018, IRI, a Chicago-based market research firm, reported total breakfast, cereal and snack bar sales in U.S. convenience stores jumped 4.9% to $189.64 million. Unit sales also increased 1.2% to 142.31 million units sold in c-stores.

Kellogg and General Mills both saw sales and unit growth combining for seven of the top 10 bar SKUs. The average price of a bar in 2018 was $1.33.

The overall outlook for the category is equally strong. According to a new report from Packaged Facts, the market for snack bars across all retail, including both nutritional and cereal/ granola bars, is projected to reach $8 billion by the end of 2019.

The “Nutritional and Cereal Bars in the U.S.” report found between 2004 and 2014 the number of households using cereal bars increased 50% and the number consuming chewy granola (category that includes granola bars) increased 33%.

The popularity of granola also grew substantially, with nearly 80% more households using it. At the same time, the number of households using cold cereal was up by only 4%. Meanwhile other traditional breakfast foods such as bacon, sausage and eggs barely kept up with the growth in the adult population.

Beyond breakfast, nutritional and cereal bars have gained a general widespread popularity. Between 2009 and 2014 the number of adults using nutritional bars increased 11%. In addition, around 44% of adults used cereal/granola bars in 2014. Bars are an easy way for consumers to stop eat-

Fast Facts: » Units sold in U.S. convenience stores increased 1.2% to 142.31 million in 2018. » Snack bar category sales overall are projected to reach $8 billion by the end of 2019.

ing three meals a day at set times and to start eating smaller portions of food throughout the day, whether they are on the go or at home.

Product manufacturers also must consider new nutritional demands from the increasingly health-conscious consumer. Bars provide an attractive way for food marketers to offer alternative, exotic sources of protein; bold, exciting flavors; ingredients with a health halo resulting from their organic and “natural” characteristics.

BAR SALES SURGE Driven by sales from Kellogg and General Mills, the category experienced sales and unit volume growth.

$ Sales

1-Year % Change

Unit Sales

1-Year % Change

Avg. Price

$189.6 M

4.9%

142.3 M

1.2%

$1.33

Kellogg's Rice Krispies Treats

$69.1 M

5.1%

53.9 M

1.8%

$1.28

Kellogg's Nutri Grain Bars

$20.7 M

2.4%

21.6 M

1.3%

$0.96

General Mills Cinnamon Toast

$12.8 M

6.4%

8.5 M

2.9%

$1.50

General Mills Lucky Charms

$10.3 M

4.4%

6.9 M

1.5%

$1.50

General Mills Golden Grahams

$9.7 M

4.2%

6.5 M

-1.1%

$1.48

Kellogg's Rice Krispies Blasted

$8.4 M

10.7%

5.8 M

9.1%

$1.46

Kellogg's Nutri Grain

$6.9 M

1.7%

7.1 M

0.2%

$0.96

Best Maid

$5.2 M

14.3%

3.0 M

11.2%

$1.70

Private Label

$4.0 M

7.5%

2.1 M

-7.5%

$1.95

Total Breakfast/Cereal/Snack Bars

Source: IRI, a Chicago-based market research firm, U.S. Convenience Store All Scan Data for the 52 weeks ending Dec. 30, 2018

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Snacks

Seeds & Nuts

Seeds, Nuts Attract Snackers

I

nstead of sitting down to three traditional meals were almost $956 million in the 52 weeks ending Dec. 30, every day, today’s busy Americans fit in food wherever 2018. That figure was down 0.4% over the previous 52-week period due to slight declines in the sale of sunflower/pumpthey can.

According to a 2018 research report by Statista, a kin seeds and corn nut snacks.

According to William Roberts, Jr., senior food and drink market research organization, 32% of Americans surveyed said they eat two meals per day and replace one meal with analyst for Mintel, a global research organization, consumsnacks, 9% replace two meals with snacks and 3% only eat ers perceive nuts and seeds to be healthy, natural and a bit indulgent. snacks.

“Brands leveraging such a reputation should be wellMost respondents agreed that always snack- positioned to capitalize on increasing consumer interest ing on treats, such as chips in snacking and on healthier snack options,”Roberts or ice cream, isn’t a good said. “The challenge for the category will be in offering » U.S. convenience store habit, and contemporary options that not only meet those demands, but which do sales of nuts, seeds and consumers—particularly so at a price point which consumers consider reasonable. corn nuts was almost Millennials and Gen Z— Consumers appear to regard the category as akin to com$956 million in the 52 tend to seek clean-label modities and, as such, place significant emphasis on price weeks ending Dec. 30, nutritional snacks that pro- in their product choice, far more than brand or even organic 2018. vide protein and an energy positioning.”

Rutter’s tries to ensure that customers have a broad boost. The nuts and snacks » 32% of Americans subcategory of “salty selection of snack products, and the chain has been pleased surveyed by Statista said to offer some of the new nut and seeds items available from snacks” can fill that bill. they eat two meals per A 2018 study of more Hershey and Mars. day and replace one “Traditional salted and salted mixes dominate the catethan 81,000 participants meal with snacks. found that those who con- gory,” said Bortner. “While we don’t offer a lot of options sumed large amounts of for spicy, the few we that we have definitely warrant the meat protein experienced space and hold their own within the category.” a 60% increase in cardiovascular disease, while those who ate a handful of mixed nuts and/or seeds daily decreased their risk of developing heart problems by 40%. The NUTS, SEEDS FILL NEED research was conducted jointly by Loma Linda University in Nut and seed sales in the c-store channel in 2018 dipped California and two educational institutions in France. slightly with snack nuts rising less than 1% to $620 million over 2017. Comparably, sales of sunflower and pumpkin GOING NUTS seeds fell nearly 3%, to $288 million during the same period.

“Nuts are a great go-to snack for between meal-snack-

Fast Facts:

ing,” said Joseph Bortner, category supervisor for Rutter’s, the York, Pa.-based convenience chain. “They offer more protein than what you may find with some other traditional snacks like chips. I think many of our shoppers purchase for future occasions. They may be in to buy breakfast or lunch with an idea of ‘I’m not sure when I’ll be able to eat next.’”

Many of the products Rutter’s offers in its nut/seed sections are for single occasion snacking or packages can be resealed for future snacking.

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58-62_Snacks.indd 62

$ Sales

1-Year % Change

Snack Nuts/Seeds/Corn Nuts

$956 M

-0.40%

Snack Nuts

$620 M

0.70%

Sunflower/Pumpkin Seeds

$288 M

-2.90%

Toasted Corn Nut Snacks

$48 M

-0.50%

Source: IRI, a Chicago-based Market Research Firm, U.S. Convenience Store All Scan Data for the 52 Weeks Ending Dec. 30, 2018

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Dairy

Embracing Daring Dairy

D

airy products, primarily ice cream and varieties of milk, remain dependable—and profitable—c-store offerings. At the same time, so-called “plant-based” milks are growing into a formidable trend.

According to Chicago-based research firm IRI, the convenience store channel for all of calendar 2018 saw sales of refrigerated almond milk top $3.4 million, a year-to-year increase of 6.5%, and ready-to-drink almond milk sales reached $1.5 million, a 206.5% spike.

Coconut milk sales, though still relatively low, rose by 15.4% from the previous year while its ready-to-drink variety notched sales up to more than $152,000, up 58.1%.

Kefir, a fermented milk drink with a sour taste, made using a culture of yeasts and bacteria, saw sales of $179,000, an 88% year-to-year rise.

Indeed, a 2018 study from McGill University looked at the four most commonly consumed types of milk beverages

ICE CREAM STILL DEPENDABLE Dairy products, including ice cream and frozen novelties continue to be a staple in most c-store line-ups. Sales of private-label ice cream grew more than 21% in 2018. Ben & Jerry’s, which showed a dip in sales last year, still enjoyed the lion’s share of the category with more than 32%.

$ Sales

1-Year % Change

$ Share of Type

Ice Cream

$509 M

1.90%

100.00%

Ben & Jerry’s

$165 M

-3.90%

32.46%

Blue Bell

$58 M

11.30%

11.31%

Haagen Dazs

$56 M

6.50%

11.05%

Private Label

$36 M

21.80%

6.99%

Hershey’s

$22 M

6.30%

4.33%

Breyers

$21 M

-13.10%

4.11%

Dreyer’s Edy’s Grand

$20 M

11.50%

3.85%

Blue Bunny

$16 M

5.10%

3.18%

Turkey Hill

$16 M

-4.40%

3.12%

Total Ice Cream

Source: IRI, a Chicago-based research firm, U.S Convenience Store All Scan Data for the 52 Weeks Ending Dec. 30, 2018.

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Milk & Ice Cream

Fast Facts: » Ice cream/sherbet sales in c-stores for calendar 2018 were $525 million, rising 1.4%. » Soy milk sales were down for both ready-to-drink (-25%) and refrigerated (-44.2%) varieties.

from plant sources—almond, soy, rice and coconut—and found that after cow’s milk, soy milk is the most nutritionally balanced.

HEALTHY CHOICES David Arens, exchange divisional merchandise manager for AAFES (the Army and Air Force Exchange Service), said sales were driven by growth in key better-for-you options through the Exchange’s BE FIT program from brands such as Halo Top, Silk Almond Milk, Danone Oikos yogurt, Naked Juice, Kraft String Cheese, Chobani, Great Day and Yup Milk.

In all, ice cream and dairy sales system-wide in AAFES’ 334 Express convenience stores totaled $22.9 million.

According to IRI, private-label ice cream sales for calendar year 2018 in the convenience store channel totaled nearly $36 million, an increase of 21.8% over the previous year. It finished fourth behind only Ben & Jerry’s, Blue Bell and Haagen-Dazs.

Westborough, Mass.-based Cumberland Farms, with 600 stores in eight states, has a popular and growing privatelabel ice cream line. Last month it introduced a new Birthday Blast ice cream flavor—with pints promotionally priced at $3.99. The new flavor launched as part of a larger ‘Birthday Blast’ private-label treats rollout that also included premium cookie bites, whoopie pie and premium chocolate bars.

Malcolm Stogo, the founder of Ice Cream University, a consulting firm in West Orange, N.J., sees frozen novelties selling quickly from c-store freezers.

“They’re also buying dairy-free, both in pints and in bars.

Non-dairy, or dairy-free, is the newest thing in convenience stores, and there are lots of reasons, actually, like lifestyle changes and mostly calories,” Stogo said. “The price points are about the same as regular ice cream.”

Coming to c-stores next likely will be alcohol-infused ice cream. This spring, Haagen-Dazs is introducing five such flavors of ice cream into supermarkets.

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Confections

Chocolate

Chocolate

Rules Candy Sales

E

veryone still loves chocolate. Well, almost everyone.

“Chocolate confectionery purchase is nearly universal, with more than nine in 10 adults reporting having purchased one form or another in the past three months,” Mintel published in its “April 2018 Chocolate Confectionery, US” report, which also noted that overall chocolate sales have increased 15% since 2012.

Year-over-year sales reflect that overall growth, as chocolate sales increased 3% in 2017 to almost $18 billion. Mintel noted that chocolate maintains its popularity because 34% of people “always have chocolate candy on hand,” while 42% make impulse purchases of chocolate and 56% “usually buy the same types of chocolate candy.”

But while people remain loyal to types and brands they have enjoyed for a long time, combinations are rising as people seek out new flavors and textures.

“Chocolate companies have been hopping on the mashup trend, merging different types of chocolate treats into one,” said George Puro, president of Puro Research Group. “Hershey’s introduced the Hershey’s Milk Chocolate

IN ANY FORM, CHOCOLATE WINS A Mintel report asked 2,000 internet users over age 18, “What types of chocolate candy have you purchased in the the past three months?” The types of purchases varied among respondents, but chocolate’s popularity is unmistakeable.

93%

Any chocolate candy Any individual candy bars

68%

Individually-wrapped chocolate pieces in bag or box

66%

(eg. Hershey’s, Mast Brothers)

Non-individually-wrapped chocolate pieces in bag or box (eg. M&M’s) Boxed chocolate

37%

Other

6% 0

20

40

Source: Lightspeed/Mintel February 2018.

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60

80

Fast Facts:

BFY LAUNCHES

54%

(eg. Russell Stover)

Bar with Reese’s Pieces to convenience stores in fall 2018.

M&M’s big innovation is the launch of a new chocolate bar filled with M&M’s Minis. The bars come in five flavors, and received a big welcome with a Super Bowl ad featuring Christina Applegate.”

There are also mashups of creamy and crunchy textures.

“We’ve seen the debut of other multi-texture mash» Chocolate comups, notably Reese’s Crunchy panies are offering Cookie Cup, the Hershey’s better-for-you opCookie Layer Crunch line and tions. the Reese’s Pieces Peanut Butter Cups,” Puro said. » The big trend in Other innovations include 2019 is mashups of Hershey Gold, Caramel flavors and textures.

M&M’s and Kinder Egg, which the National Confectioners Association said contributed to positive sales, though individual stores didn’t always see those results.

“Overall our sales were flat,” said Melissa McPherson, category manager at NOCO Express, which operates 39 c-stores in western New York. “Chocolate was down, but bagged candy was up double digits.”

But innovations in the chocolate segment are keeping big brands relevant.

“There are a couple of items that stand out,” McPherson said. “Snickers Creamy Peanut Butter and M&M’s Hazelnut are great line extensions that will really resonate with the customers.”

100

As companies continue to tap into health consciousness with better-for-you (BFY) options, customers are taking note.

“In March, Hershey is debuting Reese’s Thins, which promise to be about 40% thinner than regular Reese’s,” Puro said, adding that it is “perhaps not so surprising from the company that recently acquired healthier-sounding brands like BarkThins, Skinny Pop, Krave and Brookside.”

Puro added that Mars is following suit by investing in KIND and expanding its goodnessknows brand. And Mintel’s study conceded that, while customers who eat healthier view chocolate as an “acceptable indulgence,” that can be improved with “fresh twists on the familiar and with BFY products that don’t compromise on taste.” cstoredecisions.com

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Confections

Gum & Mints

Variation Enlivens Gum, Mints

F

Other product introductions included Trident Vibes and resh breath, fun flavors and chewables continue to drive success in the gum and mints category. Ice Breakers Ice Cubes glitter gum with flavors like cherry In chewing gum, mint is key, with products like snow cone. Moreover, Tic Tacs successfully entered the Wrigley’s Orbit Freeze and Trident Vibes boosting gum category, winning Most Innovative New Product at the their mint flavor profiles to attract customers looking for 2018 Sweets & Snacks Expo.

“This year will see its usual share of innovation from the stronger flavors. Packaging also helped drive success.

“In gum, the larger count consumer packs drove growth major players,” said Joseph Bortner, category supervisor at in the category in 2018, while most of the more traditional Rutter’s, which operates 73 c-stores in three states. “2018 packs also showed growth,” said Brett Silva, category was a very strong year resulting in double digit growth. One manager for ExtraMile Convenience Stores, which oper- of the largest growing segments in 2018 had to be Fruity ates more than 800 c-stores in California, Oregon and Confection.”

Washington. “This is a trend that should continue in 2019 as companies realize consumers are willing to pay more for MINT SALES SLIP a value.”

Though mints are viewed as the reason for fresher sales in the Silva added mints have been stagnant for a few years gum and mints category, sales of mints in convenience stores but, this year, there will be new items from top selling in 2018 fell among the seven top breath freshener brands brands that provide a reason for optimism. compared to 2017. The exception was Tic Tac sales, which The National Confectioners Association (NCA)’s data were flat. agreed, showing year-over-year increases in convenience store candy, gum and mint sales of 1.8% in 2018.

Breath Freshener 1-Year $ Sales $ Share Chewy, non-chocolate confection items comprised Brands % Change nearly half of total retail category sales in 2018, as sales of Total Category $228 M -6.50% 100.00% those products grew by 5.7%, said Carly Schildhaus, NCA’s Ice Breakers $59 M -1.70% 25.98% public affairs manager.

“These products are likely to continue to grow in 2019, as Tic Tac $47 M 0.00% 20.79% it has held strong over the past few years and we continue to Altoids $34 M -0.20% 15.09% see innovation within the category,” Schildhaus said.

Breath Savers $20 M -6.90% 8.62% Packaged Facts reported that gum reached $4.1 billion in total retail dollar sales for the U.S. chewing gum market Ice Breakers Duo $17 M -4.70% 7.26% in 2018.

Altoids Arctic $15 M -2.00% 6.67% “At convenience Breath Savers stores, non-chocolate $7 M -10.10% 3.11% Protect sales were strongest.

Source: IRI, a Chicago-based Research Firm, U.S Convenience Store All Scan Data They were up in both dol» Though gum sales confor the 52 Weeks Ending Dec. 30, 2018 lars (a 3.1% increase) and tinued a downward trend, units (a 0.3% increase),” the gum industry still Schildhaus said. yielded $4 billion in sales The introduction of a few new items in 2018 could be W ith that success, in 2018. could this be the year making a play to become household names in 2019. “I look of interesting flavors in at the success we’ve had in 2018 with Promotion in Motion’s » Chewable candy and chewy candy? Last year, Gummi Fun Mixes [as an example],” Schildhaus said.

Indeed, taste and innovation will continue to complethe major innovations mints are gaining popuseemed to be dessert- ment packaging in terms of growth. larity as they take cues “For 2019, there seems to be a renewed focus on core flavored gum, as the from gum companies that items for established brands, with innovation intended to major players introduced added texture and flavors new tastes like chur- complement these brands,” Silva said. “There will be some to their offerings. ros, cookies, sorbet and big product launches from the large manufacturers and exciting innovation throughout these categories.” s’mores.

Fast Facts:

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Tobacco

Cigarettes

Inhibiting the Cigarette Market

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ast month, Hawaii State Rep. Richard Creagan presented a bill to raise the statewide cigarette minimum purchasing age from 21 to 30 by next year. » More states contemplate age minimum of 21.

His proposal also planned to raise the minimum multiple times over the next several years—40 in 2021, 60 » Smokers could pay more in cigarette taxes this year. in 2023 and finally 100 in 2024. The bill doesn’t apply to e-cigarettes, cigars or smokeless tobacco.

Hawaii isn’t the only state contemplating a higher miniThe continued regulatory crackdown on cigarettes sales is affecting both Hawaii retailers and the convience indus- mum age. Legislators in Virginia voted to go 21 last month.

West Virginia and Mississippi recently announced minitry as a whole.

“We thought it was an unusual bill. It’s the first time we’ve mum-21 bills.

States lawmakers across the country hope to raise taxes, seen a bill like this,” said Neil Ishida, director of employee relations and government affairs for ABC Stores. The con- too. For example, Indiana lawmakers put forth two bills: venience store company operates 77 sites on the islands of HB 1551 would add $1 per pack and raise the legal purchase age to 21; HB 1565 leaves the minimum age, but Kauai, Maui, Oahu and Hawaii.

The aggressive approach in this particular bill grabbed levies a $2-per-pack tax. Wyoming officials are debating a headlines, but many in the tobacco and convenience $1 increase and Vermont is weighing a new $1.25 tax. store industries doubted it had much of a chance to survive the process. Indeed, a few days later, the Honolulu Star COOLING OFF Advertiser reported Rep. Creagan agreed to amend HB According to IBISWorld, cigarettes, including menthol, 1509 to simply raise the minimum purchase age for tobacco account for more than 71% of the U.S. tobacco wholesale products to 25 during testimony before the House Health market, but retail volumes keep falling. Each top brand regCommittee. istered year-over-year unit sales losses for both the 12- and 52-week periods ending Jan. 12, 2019 per Nielsen data reported by Wells Fargo Securities. Natural American Spirit was the only brand to post positive numbers. Even price CIGARETTES CONTINUE TO SLIP increases, from 1.5% to as much as 6.7% for the same periNot taking into account price increases and their impact on ods, couldn’t compensate, and most Big Tobacco brands dollar sales, top-selling cigarette brands continued to lose earned less in dollar shares. ground in 2018.

“Cigarette manufacturers realize almost three times the leverage on earnings from a point of pricing than a point 1-Year % Chg Cigarettes $ Sales of volume,” said Bonnie Herzog, senior analyst for Wells Brand 52 Weeks 52 Weeks Fargo Securities. “Virtually all of the [2018 Q4 Tobacco Talk Survey] respondents expect a list price increase to be led by Marlboro $28.3 B -3.4% Philip Morris USA in March.”

Newport $7.6 B -6.6% Not only are fewer people smoking, some smokers are switching to e-cigarettes or vaping, or dividing their tobacco Camel $5.3 B -5.4% dollars between combustible cigarettes and these devices.

Pall Mall $4.0 B -6.9% “We are continuing to see a slow migration to Juul and other vaping devices,” noted Sean Bumgarner, vice presiL&M $2.4 B -11.6% dent for Ozark, Mo.-based Scrivener Oil Co., which owns Natural American Spirit $1.9 B 2.9% and operates the Signal Food Stores convenience chain.

Although industry analysts suggest lower gas prices Winston $1.3 B -10.8% could help cushion further decline of cigarette sales in Kool $952 B -4.8% 2019, they still forecast a downward trajectory for upcomSource: Nielsen eXtended All Outlet Combined, Wells Fargo Securities, for the 52 weeks ending Jan. 12, 2019 ing quarters.

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Fast Facts:

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Tobacco

RYO

RYO Still Relevant

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ccording to scan data from IRI, a Chicago-based research firm, convenience store sales of roll-your- RYO SUBJECT TO FDA RULES own (RYO) tobacco decreased 10.9% to 545 million There are constant reminders that cigarettes are subject in the 52 weeks ending Dec. 30, 2018. to U.S. Food and Drug Association mandates. Of course, Considering that RYO earned half the market share that retailers should remember that roll-your-own tobacco fall pipe tobacco enjoyed in the convenience channel last year under the same rules. in terms of other tobacco products, additional market pressures—including potential federal regulation—would not be welcome news.

E-cigarette brand Juul and other vapor products attracted significant scrutiny from the U.S. Food and Drug Administration (FDA) last year, leaving RYO relatively untouched. Chris Greer, president and CEO of the Tobacco Merchants Association said there are no indications that the spotlight will shift in 2019.

“I do not see the spotlight shifting to RYO in 2019. FDA has made very clear that flavors and connected issues of youth is the major focus across multiple categories,” Greer said. “As RYO is unflavored it would be difficult to see it sharing the spotlight on the complex flavor issue.”

NICOTINE WITHDRAWAL Greer does voice one caveat: Namely, Scott Gottlieb, commissioner of the FDA has taken pains in all his recent announcements to note that the FDA is still at work on the issue of a nicotine product standard.

“It remains to be seen if the FDA will be able to (add) complex policy changes in 2019, but certainly RYO would be part of a nicotine standard,” Greer said. “For RYO, I think it would be quite complex as the end product being smoked is highly variable unlike machine-made cigarettes, which have standardized net tobacco weights.”

Still for many retailers, the RYO segment is still a profitable performer despite losing some traction in 2018.

“The RYO category continues to perform well in our markets, however it was down slightly in 2018, approximately 3%,” said Tim Greene, category director of tobacco and

Fast Facts: » RYO tobacco decreased 10.9% to 545 million in the 52 weeks ending Dec. 30, 2018. » While all is currently quiet on the regulatory front, time will tell if RYO will see new regulatory hurdles from the FDA. 70 Convenience Store Decisions March 2019

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Source: The FDA Center For Tobacco Products, RE-02-R1; Last Updated August 2018

general manager for Boulder, Colo.-based Cigarette Store Corp. “Our cigarettes were up 4% in 2018; typically when we see growth in cigarettes the RYO is flat or down slightly, which we saw in 2018.

Cigarette Store Corp. owns Smoker Friendly and the Gasamat convenience chain.

Because more U.S. consumers are seeking alternative products to cigarettes, that is partly why vapor enjoyed a tremendous surge in 2018. Green said the transition from cigarettes also benefited the RYO segment.

How local legislation efforts to control tobacco affects that momentum is any retailer’s guess.

“As the FDA flavor focus has attracted significant state and local attention, I believe that RYO will likely not face more than the usual attention,” Greer said. “We have seen, however, a general increase in localities looking into retailer licensing and seeking to impose further restrictions in the form of caps on the number of licenses, restrictions on retailers located close to churches, schools and parks and restrictions on sale of flavored products.” cstoredecisions.com

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Tobacco

Smokeless

Smokeless Sales Soften

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n 2017, the smokeless tobacco category sustained a substantial hit when Altria Group issued a nationwide recall for some of its most popular brands, including Copenhagen and Skoal.

Fast forward to 2019 and the category is still standing on unsettled ground. Smokeless tobacco sales have climbed back up, but remain below pre-recall levels.

According to the Wells Fargo Securities’ 2018 Q4 Tobacco Talk Survey, convenience store owners and operators were less optimistic for growth through last year than they were for 2017, and notably less than in 2016. In the 52 weeks preceding March 2018, three companies—Altria Group Inc., British American Tobacco

and Swedish Match—accounted for about 98% of U.S. dollar sales of smokeless tobacco.

COMPLEX ISSUE There are multiple factors at play, including state and local regulations.

Minnesota is a prime example. Last summer, Minneapolis implemented a ban on mint and wintergreen smokeless tobacco products from any retailer except tobacco shops and licensed liquor stores. Several other cities in the Gopher state have passed similar bans, creating a noticeable shift for the other tobacco product (OTP) segment.

C-stores in the state have been affected in varying degrees.

“We are a small chain, and 40% of our locations are affected by the

SMOKELESS RIDING THE WAVE Since 2016, c-store retailers have experienced highs and lulls in the smokeless segment, but overall this other tobacco product has been a steady performer.

5%

2016 2017 2018

4%

3%

2%

Quarter 1

Quarter 2

Source: Wells Fargo Securities, Q4 Tobacco Talk Survey, Jan. 28, 2019

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Quarter 3

Quarter 4

Fast Facts: » Global snus sales could exceed $1.4 billion by 2022. » Altria Group Inc., British American Tobacco and Swedish Match now account for about 98% of U.S. sales of smokeless tobacco.

menthol ban. These locations are seeing high double-digit declines. The remaining locations are up double digits if they border Minneapolis or flat if they are located in second-ring suburbs,” said Madalena Morgan, director of convenience store operations for Bobby and Steve’s Auto World, a chain headquartered in Minneapolis.

Massachusetts is another state struggling with a variety of municipal regulations for other OTPs, in addition to a high tax base.

“Massachusetts has a 210% excise tax rate, so we stay flat or slightly down. I do have two stores in New Hampshire that do better. They are up slightly in all styles and brands,” said Anna Bettencourt, senior category manager for Verc Enterprises. The company operates 24 stores.

Fact.MR, a market research firm, estimates the global snus segment will exceed $1.4 billion by 2022. The market research firm also predicts the original flavor snus will remain a customer favorite, and could reach nearly $600 million in three years.

Domestically, c-stores await the U.S. Food and Drug Administration’s decision on several modified-risk tobacco product (MRTP) applications. Currently eight Swedish Match General snus applications have progressed to the second stage of consideration. cstoredecisions.com

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Tobacco

Cigars

Cigars Help OTP Category

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onsidering the powerful try members can submit comments in regulatory microscope that response to the proposed regulation,” e-tobacco products were said Thomas Briant, executive director subjected to last year, it was of the National Association of Tobacco somewhat surprising the cigar segment Outlets (NATO). “Then, the FDA must didn’t draw nearly the same attention review all submitted comments from in terms of scrutiny from the U.S Food the industry and the public, obtain final approval of the regulation from the and Drug Administration (FDA).

That’s scheduled to change in 2019. White House Office of Management The FDA announced in November and Budget, and issue a final rule.”

This whole process can take up to of 2018 that the agency intends to issue a proposed regulation ban- a couple of years before a final regning the sale of all flavored cigars ulation would go into effect, Briant (large, small and cigarillos) sometime explained. in 2019. The proposed regulation has not been issued yet. Like other FDA STEADY PLAYER initiatives, retailers and other stakeUntil that regulatory oversight holders will have a chance to express descends, cigars continue to be a their opinions. steady player in the other tobacco “When it is issued, there will be a products (OTP) category. public comment period where indusAccording to Nielsen research data, reported by McLane Inc., a supply chain services company that serves the CIGARS EARN convenience channel, pouch cigars in the first quarter of 2018 accounted for THEIR WAY 72% of cigar volume and grew 22% Among other tobacco products segment with “Swisher, and White Owl and scan data from IRI, c-store cigar sales Game driving more than 80% of this rose 9% to $3.5 billion in 2018. Compatotal volume.” rably, smokeless tobacco was the runOverall c-store cigar sales rose away performer with sales of $7.2 billion.

9% to $3.47 billion in the 52 weeks 1-Year ending Dec. 30 2018, according to Tobacco Sales $ Sales % Change IRI, a Chicago-based research firm.

Smokeless Comparably, unit sales rose 6.9% to $7.2 B 5.80% Tobacco almost 2.4 billion, compared to 2017.

Greg Moore, a buyer for the Cigars $3.5 B 9.00% Army & Air Force Exchange Service Electronic (Exchange), purchases tobacco prodSmoking $2.8 B 163.00% ucts for more than 300 U.S. military Devices convenience locations. He said the All Other Exchange’s mass-market cigar assortTobacco $123 M -7.80% ment will remain unchanged in 2019 Products unless suppliers offer new items that are trending in the market place.

Source: IRI, a Chicago-based research firm, U.S Convenience Store In 2018, a few brands stood out All Scan Data for the 52 Weeks Ending Dec. 30, 2018. among customers.

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Fast Facts: » The FDA plans to issue a proposed regulation in 2019 that would ban flavored cigar sales. » Overall c-store cigar sales rose 9% to $3.47 billion in the 52 weeks ending Dec. 30 2018, according to IRI, a Chicago-based research firm.

“John Middleton Black & Mild is a bestseller—sales were up 5.1% compared to the previous year,” Moore said.

Overall, mass-market cigar sales at the Exchange were down 6.3% compared to the previous year.

For the most part convenience chains were able to increase their tobacco category sales in 2018 by finding the right number of SKUs, the right number of products and the right amount of selection.

There is also some movement in the channel to premium cigars, though hard numbers aren’t immediately available.

WATCHING 2019 Though convenience retailers can control how they will stock and promote cigars, they can only wait and see what 2019 has in store in terms of regulatory mandates. Beside the FDA’s proposed regulation banning the sale of all flavored cigars, Briant said, the threat of local legislation against tobacco sales always looms.

“Several state legislatures are considering bills that would raise taxes on cigars. These include Hawaii, Nebraska, New Hampshire and Oregon,” Briant said. “Also, a bill is pending in the California legislature that would ban the sale of all flavored tobacco products, including flavored cigars.” cstoredecisions.com

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SIZE M AT TERS FO R M O R E I N FO R M AT I O N CO N TAC T YO U R S W E D I S H M ATC H R E PR ES E N TAT I V E 8 0 0 - 3 6 7- 3 6 7 7 • C U S T O M E R S E R V I C E @ S M N A . C O M © 2 019 S M C I H O L D I N G , I N C .

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Tobacco

E-Cigarettes

E-Cig Expectations Surge

T

he e-cigarette category kicked off 2019 on a strong footing. According to Nielsen data, reported by Wells Fargo Securities, the segment accumulated more than $3.3 billion in retail dollar sales in all retail channels for the 52 weeks ending Jan.12, 2019.

What’s more, the convenience store industry is optimistic about this year’s profit potential. When Wells Fargo Securities surveyed approximately 55,000 c-store owners and operators in the fourth quarter of 2018, approximately half of the respondents agreed the e-cigarette category was poised to grow in 2019.

“Although the regulatory bodies in the U.S. are consistently in pursuit of devising strict regulations and heavy taxations to curb the growth of the e-cigarette market, it is expected that the trend of e-cigarettes will not be curtailed,” said Faisal Ahmad, CEO of BIS Research.

Of course, some of that positive outlook is attached to the ongoing blockbuster performance of Juul. For the same 52-week period, the device earned more than $2.2 billion, and commanded two-thirds of the dollar share. Approximately 85% of survey participants already stock Juul, and many indicated they will allocate more shelf space for the top-seller.

Fast Facts: » E-cigarettes tallied more than $3.3 billion in sales for the 52 weeks ending Jan. 12, 2019. » Vuse Ciro jumped a massive 2,639.4% in unit sales.

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COME BACK STORY

E-CIGS’ PACK MENTALITY Meanwhile, the category’s JUUL continues to outsell the competition other brands represent a mixture by a super-wide margin, other e-cigarette of gains and losses.The British brands posted positive dollar share gains American Tobacco’s e-cig family for the period ending Jan. 12, 2019. is a good example. Vuse, its original offering, once again posted E-Cigarette $ Sales $ Share negative year-over-year dollar For 52 For 52 and unit sales despite increased Brand Weeks Weeks pricing. The Vuse Ciro, however, jumped 2,684.7% in dollar sales Juul $2.29 B 66.60% and 2,639.4% in unit sales for the Vuse $191 M 6.30% 52 weeks ending Jan.12, 2019.

MarkTen XL $157 M 5.10% NJoy has bounced back, too.

Founded in 2006, the disposBlu $140 M 4.60% able e-cigarette manufacturer Vuse Ciro $121 M 3.50% filed for chapter 11 bankruptcy in 2016, but wrapped up 2018 with a Logic $107 M 3.40% 63.2% gain in dollar sales over the Vuse Vibe $67 M 2.70% previous year, and a 68.5% jump My Blu $63 M 1.70% in unit sales.

Although a couple of the NJoy $48 M 1.50% MarkTen products posted growth MarkTen XL for the same period, last fall the $35 M 1.10% Bold Altria Group decided to pull it for 2019. Not long after, the manuVuse Alto $33 M 0.80% facturer confirmed it purchased MarkTen $20 M 0.50% a 35% stake in Juul, which allows Elite retailers to now stock the pod MarkTen $14 M 0.40% alongside its big-name cigarettes.

Still, public sentiment for the Source: Nielsen eXtended All Outlet Combined, Wells Fargo Securities, for the 52 weeks ending Jan. 12, 2019 category remains under scrutiny. The U.S. Food and Drug Administration (FDA) and the So, what do c-store owners and U.S. Surgeon General called manufacturers on the carpet for the growing operators do with a category that has use among underage youth. In early a standout brand that’s also drawn the February, FDA Commissioner Scott ire of regulators and legislators? How Gottlieb, MD, publicly expressed his does that impact inventory balance disappointment with the Altria, JUUL and marketing strategies?

“Consumers may purchase these transaction.

“There has been a lot of uncertainty products for a variety of reasons, with the e-cigarette category, which I but the category seems stuck and believe has worked its way into sales,” lacks its own identity,” Dell’Alba said. said Lisa Dell’Alba, president and “Marketing the way we have marketed CEO of Square One Markets based in cigarettes may not be the answer for current and potential consumers.”

Bethlehem, Pa. cstoredecisions.com

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Tobacco

Vape

Flavorless Future for Vaping?

F

lavored e-liquids once were posals on the state and local levels.

“Proposed legislation is everythe key marketing focus for the electronic nicotine delivery sys- where, including a New York City ban » Hawaii proposes 70% tax on being considered by the city countems (ENDS) marketplace. wholesale e-liquids.

Now that marketing banner is cil and a statewide ban proposed by being stretched tighter by federal and Governor Cuomo,” said Jim Calvin, » myblu Intense Nicotine Salt president of the New York Association local regulators. will roll out two new flavors.

For example, New York City of Convenience Stores. “With all the Council is considering a ban on vap- pending regulatory activity, and maning flavors, and at presstime a key ufacturers adjusting their marketing committee had recently held a public strategies in response to FDA threats, to be determined. But as part of the hearing to discuss the proposed ordi- it’s going to be a volatile year for the agreement, the manufacturer will add nance, providing vaping stakeholders vaping products category in New York Juul coupons to its cigarette packthe opportunity to speak at a public c-stores. aging as well as share its prime shelf Total convenience store sales of space in stores. hearing.

Last fall, the U.S. Food and Drug electronic smoking devices rose 163% “Altria will put pressure on other Administration (FDA) called on e-cig- to $2.8 billion in the 52 weeks end- competing brands just like it does with arette and vaping manufacturers to ing Dec. 30, 2018, according to IRI, a cigarettes, moist smokeless tobacco submit plans on how they will work Chicago-based research firm. and cigars,” said Rick Staley, merchantoward reducing such use or face posdising manager for Tri Star Energy LLC. sible removal from store shelves.

The Nashville, Tenn.-based, company MATTER OF CHOICE Then last November, the FDA Cessation proponents in New York operates Twice Daily and t Fuel stores. announced a proposed rule change to have stated that a ban on sales at conE-liquids have become a target for restrict the sale of flavored e-liquids or venience stores eliminates choices in taxes, too. According to the National nicotine salts to 21-plus-only retailers, the locations cigarette smokers are Association of Tobacco Outlets meaning convenience stores would most likely to encounter them, which (NATO), several states have introno longer be able to carry the prod- means fewer impulse purchases that duced new taxes, including Hawaii. ucts—details of the regulation change may lead to long-term switching from Bills in both the state House and are expected to be released in early cigarettes.

Senate would add a 70% tax on the spring. This is on top of bans already How Altria Group’s minority stake wholesale price of e-cigarettes and enacted in some cities and new pro- in Juul might lessen this aspect is yet e-liquids. Currently, only California, Pennsylvania and Minnesota tax the wholesale value.

There’s good news for the category, VAPOR VS. THE FDA too. At the NACS Show last October, E-Alternative Solutions, maker of During two different quarters in 2018, researchers for Wells Fargo Securities Cue vaping pods, introduced Leap, Tobacco Talk surveyed c-store retailers and ask them if the U.S. Food and a closed vaping system using nicDrug Administration’s (FDA) efforts will have an impact on the broader vapor otine-salts-based e-liquids that will category. Responses from those surveyed shifted as 2018 progressed: be available in three nicotine levels, including at 0%.

Yes No Unsure Fontem/Imperial Tobacco’s myblu Q3 2018 Responses 30% 63% 7% Intense Nicotine Salt e-liquid pods will roll out two new flavors, Mint-Station Q4 2018 Responses 63% 22% 15% Liquidpods and Tobacco Liquidpods, Source: Wells Fargo Securities, Q4 Tobacco Talk Survey, Jan. 28, 2019 later this year.

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Fast Facts:

cstoredecisions.com

2/25/19 10:36 AM

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

THIS IS THE YEAR. MAKE THE SWITCH. Designed for adult smokers. Not for sale to minors.

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

CALIFORNIA PROPOSITION 65 WARNING: This product contains chemicals known to the State of California to cause cancer and birth defects or other reproductive harm.

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

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Tobacco

Tobacco Accessories

New Market

for Accessories

A

When a high-end department store starts selling cannan increasing number of states have voted to legalize the recreational use of marijuana. In bis accessories at price tags that rival those of Louis Vuitton November 2018, Michigan joined the ranks, and merchandise, you know there’s a serious trend underway.

Barneys New York Inc. announced in February it was as of January 2019, Vermont residents can legally use the substance, but it cannot be sold on the retail level. opening a “luxury cannabis and wellness concept shop” That brings the total number of states to have fully legal- in its Beverly Hills, Calif. store. In addition to showcasing ized cannabis to 10 plus the District of Columbia, with four various pipes, it will stock traditional tobacco accessories, more evaluating the possibility. That all means a growing including ashtrays and rolling papers.

“As CBD/hemp products are being introduced to the population of customers, in addition to consumers of cigarettes, cigars, roll-your-own tobacco and other combustible industry, it reminds me greatly of the past when ‘everyone was bringing an electronic cigarette to market.’ This will products. be interesting to watch as it unfolds,” said Lou Maiellano, president of TAZ Marketing & Consulting Group, which specializes in the tobacco industry. “I see an increase in the market of accessories, particularly in the independent retailer space.”

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A recent Marist College-generated study estimated 55 million adults regularly use marijuana, not including the emerging field of cannabidiol, or CBD. Bloomberg predicts cannabis sales could reach $50 billion by 2026, and Forbes reported that 2018 spending on cannabis concentrates, which can be used in vaping devices, reached approximately $3 billion.

That demand can boost business for associated paraphernalia, such as lighters, pipes, rolling papers and other products.

Fast Facts: » 2018 spending on cannabis concentrates, which can be used in vaping devices, reached approximately $3 billion, according to Forbes. » New demand for cannabis products, thanks to legalization in several states, may grow business for associated paraphernalia, from lighters and pipes to rolling papers. cstoredecisions.com

2/25/19 10:38 AM

While c-stores have yet to become cannabis outlets to any degree, they can cater to this customer base, which could help revitalize the tobacco accessories segment. For years, disposable lighters have carried the category, but as the number of smokers continues to decline, sales have softened. According to IRI, a Chicago-based research firm, total unit sales of lighters in U.S. convenience stores for the 52 weeks ending Dec. 30, 2018, fell by 2.2%; dollar sales dropped by 0.4%.

Lighters have added fuel to the bottom line for the Cigarette Store Corp. Tim Greene, category director of general merchandise and tobacco, attributes the increased income to expanding inventory. The Boulder, Colo.-based company operates more than 100 Smoker Friendly, Tobacco Depot locations and Gasamat c-stores in five states.

“Sold units actually have declined year after year from 2016 through 2018, approximately 3%, Green said.

“However, we are selling a wider variety of lighter styles, which has led to a more profitable category even though unit sales are down.”

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LIGHTERS BURN BRIGHTLY

Lighters remain the top draw of the tobacco accessory segment, but in recent years, lighter sales have shown signs of softening.

$ Sales

% Change

52 Weeks

52 Weeks

2013

$538 M

2.76% over 2012

2016

$614 M

4.08% over 2015

2018

$626 M

0.4% over 2017

Year of Sales

Sources: IRI, A Chicago-Based Market Research Firm, Total U.S. Convenience Stores, 52 Weeks, Ending Dec. 29, 2013; IRI, Total U.S. Convenience Stores, 52 Weeks Ending Dec. 25, 2016: IRI, Total U.S. Convenience Sales, 52 Weeks Ending Dec. 30, 2018

On the other hand, he’s cultivated a greater cannabis accessories profile.

“We have dedicated more space to the accessory category to accommodate the new offerings and a wider variety of offerings,” said Greene.

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Health & Beauty Aids

Make-Up & Medicine

HBA Making Headway

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“The c-stores also do better with pri- lotion in the summertime, and—in onvenience store consumers will always appreciate vate-label items because they offer a my city locations, where people get being able to swoop into a better return on investment,” Bock said. on those scooters and frequently crash—we are selling bandages and nearby store to grab a cosNeosporin and things of that nature.” metic or healthcare item to solve a GROWTH AHEAD Convenience stores are becoming a momentary need.

Amer Hawatmeh, president of St. Increasingly, they are opting for nat- George Oil Inc., operator of six Coast prime solution for patrons who want a ural and organic products, making the to Coast convenience stores in greater retail remedy—but in small packages.

“Other than controlling the category health and beauty aids still a strategic St. Louis, Mo., called HBA one of his so it doesn’t walk, it’s actually been a category that retailers need to plan for. best-selling categories.

Consumers’ need for lip-care prod“With all of these smaller-portioned top category, especially because many ucts, cold medicines and vitamins items, it has been perfect for our indus- companies took away their large sizes,” without having to wait makes c-stores try,” Hawatmeh said. “That’s what we Hawatmeh sad. “Like DayQuil went a natural go-to channel for this cat- have really focused on, all the two- away from the big boxes to conveegory. C-store sales of cold/allergy/ pack stuff and depending, obviously, nience boxes. When people need it, sinus tablets and packets topped on the area: picking up the suntan they know where to get it now.” $151 million for the 52 weeks ending Dec. 30, 2018, according to IRI, a Chicago-based research firm. Mineral HEALTH, BEAUTY & WELLNESS supplements rose an impressive 25.4% to $97 million during the same period. Analgesics, upper respiratory and gastrointestinal medicines make up over half of Sales of internal analgesics exceeded health and beauty sales in the c-store channel. Retailers should pay special attention to ensure their planograms have the right SKU mix to meet consumers’ needs when $398 million, up 2.4% over 2017. reviewing the category, according to a recent McLane Strategic Merchandising Portal.

Anthony Bock, a retail expert in Las Vegas, urged c-store operators to 1-Year % $ Share $ Sales stock and merchandise their HBA catChange egories to complement each store’s Grand Total (excluding shots) 100% $700.0 M 2.2% unique location and clientele.

“It all comes down to location HEALTHCARE 66.3% $464.1 M 2.5% and what their customers are lookAnalgesics 24.2% $169.3 M 2.6% ing for,” Bock said. For example, a local 7-Eleven down the street from Upper Respiratory 21.1% $147.4 M -0.5% an apartment complex offered largerVitamins/Supplements 10.0% $70.1 M 10.7% sized packages for regular customers, Gastrointestinal 8.6% $60.1 M 2.5% while stores nearer the Vegas Strip stocked smaller-sized SKUs. Other OTC Meds/Remedies 1.6% $11.3 M 0.2%

Fast Facts: » C-store sales of cold/allergy/ sinus tablets and packets topped $151 million in 2018, according to IRI. » Sales of internal analgesics exceeded $398 million, up 2.4% over 2017.

82 Convenience Store Decisions March 2019

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Smoking Cessation

0.9%

$6.0 M

-8.8%

PERSONAL CARE

33.7%

$235.7 M

1.6%

External Care

14.3%

$99.8 M

4.6%

Family Planning

8.4%

$58.5 M

-5.2%

Grooming

6.3%

$44.3 M

2.5%

Feminine

2.8%

$19.9

-0.1%

Baby Care/Needs

1.2%

$8.4 M

1.3%

Cosmetics

0.7%

$4.7 M

34.8%

Source: McLane Strategic Merchandising Portal December 2018

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Technology

Prepaid

Prepaid Offers Retailing Prospects Fast Facts:

I

n 2019, c-stores can profit gift cards from major national brands to meet the needs with open-loop prepaid card of our customers of all ages,” Gaskins said. “The cateoptions, and by combining gory includes, but is not limited to, financial entities (Visa prepaid within their loyalty Vanilla), wireless carriers (Verizon, AT&T and T-Mobile and program—as a reward option and/ TracFone), gaming firms (Sony PS4 and Xbox), third-party or a way to pay via a mobile app, companies (Amazon, Cabela’s, Bass Pro Shops, Home said C. Sue Brown, director, pre- Depot) and Yesway’s very own gift card.”

Yesway merchandises the prepaid cards on kiosks. paid advisory service for Mercator “Wireless cards are the most popular, followed by finanAdvisory Group Inc., a research cial cards,” Gaskins said. “Yesway-branded gift cards are and advisory services firm. » Adding prepaid to In addition, virtual cards con- also very popular and provide customers a great gift option loyalty programs can to make item and gas purchases at any Yesway store. We tinue to gain traction. aid retention, repeat Combining prepaid with loy- also offer fuel rewards through our loyalty program on business and brand alty programs drives repeat third party gift cards, which helps to drive excitement and loyalty. business, retention and brand engagement during holidays and key events.”

Yesway also provides bill pay and money order services loyalty, Brown noted.

“If I just get a stamp on something I may or may not go in select stores and is in the process of expanding and back to that store, but if I have funds/dollars on a card, I will improving these services. be sure to use them,” Brown said. “Also, depending on the prepaid card, if they are registered—meaning the card has the customer name on it—marketing can also be utilized to push advertisements and specials noting ‘we haven’t seen Loads in the in-store gift cards segment of U.S. closedloop prepaid cards market shot up to $91.1 billion in you in a while’ to customers.”

C-stores should offer open-loop in addition to closed- 2016, up from $85.7 billion in 2015 and slightly down loop cards for specific stores in today’s disruption-filled from $93.5 billion in 2014. Going forward, the segment environment where many retail establishments are going is expected to increase in the following years, beginning bankrupt, a trend pushing purchasers to open-loop options, in 2017. which are good anywhere Visa/Mastercard is accepted, 1 18-202 25 5%, 20 Brown said.

CACR $23.8 $22.9 The Consumer Financial Protection Bureau (CFPB) pre$22 $21.2 paid rules go into effect this April after several delays, but 20 $19.8 $20.3 are unlikely to impact retailers. The rules apply specific fed$18.3 $17.7 $17.9 eral consumer protections, and prepaid-card packaging 15 $16 must now display specific disclosure information.

“Only general purpose reloadable (GPR), payroll and government-benefit cards are affected by the new regula10 tions,” Brown said.

» Open-Loop cards that can be used anywhere credit cards are accepted are increasingly attractive in an environment where many stores are filing for bankruptcy.

GROWING CLOSED LOOP

PREPAID SOLUTIONS Yesway has experienced exponential growth in prepaid cards and gift cards due to the opening of additional stores over the past year, said Derek Gaskins, senior vice president of merchandising and procurement with Yesway, which operates 150 c-stores.

“Yesway offers a one-stop solution of prepaid cards and cstoredecisions.com

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5 0

2012

2013 2014 2015 2016 2017 2018(f) 2019(f) 2020(f) 2021(f)

Source: Mercator’s “15th Annual U.S. Open-Loop Prepaid Cards Market Forecasts, 2017–2021” November 2018

March 2019 Convenience Store Decisions 83

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Technology

Loyalty

Loyalty Plans Spur Engagement

I

n spring 2018, NOCO Express, with 39 c-stores throughout western New York, partnered with Paytronix to launch a new rewards program.

NOCO’s contract with its previous program was coming to an end and it wanted a partnership that could join loyalty and mobile. It was also impressed with the Panera app (powered by Paytronix) that uses a ‘surprise and delight’ model instead of points, which Jim DeFilippis, vice president and general manager for NOCO Express, pointed to as the “best in class” model for loyalty programs today.

Surprise and delight programs send customers coupons for free items, especially if they haven’t been to the store in a while, something particularly useful in driving fuel-only customers into the store.

“It keeps you interested because you never know what’s going to pop up,” DeFilippis said.

The improved NOCO Friends and Family program and app launched in May 2018.

In addition to surprises, with each purchase customers gain entry into seasonal sweepstakes for prizes like a fire pit or trip to » Surprise & Delight the Bahamas. Once the entries programs gain positive traction. hit a certain amount they double, then triple. » Mobile tie in to loyalty is “People really seem to gravan effective combination. itate to it, so they really get it,” DeFilippis said.

Vendors are eager to donate prizes as they see the amount of publicity the sweepstakes generates. Winners are announced in the app and in-store so customers know people are actually winning prizes.

In-store customers can tap the app to scan a QR Code or use a card. At the pump, physical cards are currently still needed. With the card customers get three cents off per gallon of gas. NOCO kept the EZ Pay option that currently gives six cents off per gallon if the loyalty card is linked to a checking account.

NOCO is testing offering multiple sweepstakes entries for specific item purchases to move certain products.

“Our loyalty customers actually had about a $3 higher ring ratio,” DeFilippis said.

One big challenge was that the former program hadn’t recorded customer contact information, so just switching customers to the new program wasn’t possible. NOCO had to re-enroll customers, gaining information such as email

BRAND IS AT THE CORE Loyalty programs continue to heavily influence member advocacy, retention and spend. A majority of consumers agree that loyalty programs make them more likely to continue doing business with brands. Moreover, various consumer groups indicate loyalty programs are a meaningful part of their brand relationships.

Fast Facts:

84 Convenience Store Decisions March 2019

83-89_Technology.indd 84

Source: The Bond Loyalty Report 2018 US Executive Summary

addresses and phone numbers. More than 18,000 members have registered since May.

MOBILE MAKE-UP “A loyalty program linked to a mobile application is powerful for retailers who have been able to get consumers to opt into the program,” said Perry Kramer, senior vice president and practice lead, BRP, a retail-management consulting firm.

Using today’s technological advances such as location data, geolocation, geofencing and beacon technology, retailers can leverage their ability to connect with the consumer electronically even before they pull their vehicle onto the property.

“These tools will continue to be used to speed up drivethrough and in-store lines, offer personalized marketing while at the pump and in-store marketing,” Kramer said.

Unfortunately, 63% of retailers can’t identify their customer before checkout, according to BRP’s “2019 POS/ Customer Engagement Survey.”

Kramer noted c-stores should continue to focus on loyalty programs that allow them to identify consumers and connect with them in a personalized way. cstoredecisions.com

2/24/19 11:52 AM

The convenience store industry’s young executives and next-generation leaders face unique challenges as they grow their businesses in the fast-paced, competitive convenience store market. The National Advisory Group’s (NAG) Young Executives Organization (YEO) was formed specifically to addresses these challenges and help the industry’s leaders of tomorrow identify solutions with others in their age group. YEO exists to serve as an effective conduit for getting young professionals more involved and prepared for leadership positions both in their companies and in the broader convenience store industry.

Convenience store companies must identify their next-generation leaders and groom them for management positions. This is where YEO can help.

YEO membership offers next-generation leaders a network of other young leaders in similar positions. The group meets twice annually at an annual roundtable in the spring and the NAG Conference in September.

For information on joining YEO or NAG, contact NAG Executive Director John Lofstock at jlofstock@csdecisions.com.

THANK YOU TO OUR 2019 SPONSORS:

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Technology

Loss Prevention

Loss Prevention Is About the Basics

K

um & Go is taking a new approach to loss prevention in 2019, starting on the ‘TRL path.’

The Retail Industry Leaders Association introduced TRL (Total Retail Loss), designed to encourage businesses to consider loss differently, a couple years ago.

“Specifically, it provides a much better way to define and measure loss of all kinds by providing a typology consisting of 33 different categories that cross the entire spectrum of retail theft and fraud,” said Britt Davidson, manager of loss prevention for Kum & Go, which operates more than 400 stores in 11 states.

The chain aspires to obtain more accurate control data.

“This will start at a very high level by identifying major areas/sources of loss and then breaking each one down to very granular buckets,” Davidson said.

“By using the TRL typology, we will be able to better create efficiencies in our roles as well as know where our control and business opportunities lie.”

“The introduction of workman’s comp, food safety and internal audit functions will allow our team to become better partners with the business while driving down losses and reducing risk,” Davidson added.

Last year Kum & Go began its foray into the basics of camera analytics.

“This year we want to jump into the

Fast Facts: » In 2019, best practices in loss prevention still come to down to the tried-and-true basics. » Skimming remains a key concern industry wide.

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ADVANCES IN TRACING TOOLS The Emerging Technologies benchmark survey conducted in 2017 defines “emerging technologies” as technologies some retailers have started implementing, but are not yet widespread. Respondents were asked about the extent to which they were using or planning to use these technologies in their businesses.

GPS Product Tracking Exception-Based Video Alerts RFID Biometrics Feature Recognition Smart Shelves POS Product Activation Non-scan POS Detection Body-Mounted Cameras

0

20

40

60

80

100

Source: “Emerging Technologies,” by Adrian Beck, Walter Palmer, and Colin Peacock. LP Magazine, May-June 2017 issue

analytics pond and begin to leverage gas pump, per the U.S. Secret Service.

This skimming device reads the conthis technology outside of traditional loss prevention functions. We are tactless card’s primary account number excited to see how this technology “over-the-air” before it reaches the can provide us with better insight into payment terminal, defeating point-topoint encryption. our daily trends.”

Kum & Go spent 2018 helping to introduce new laws and advocating for EMBRACE THE BASICS increased penalties for skimming and “The prudent store operator invests credit card fraud. It managed to intro- in these tools and the tedious training it duce new and/or revised language takes to maximize the analytical advaninto legislation in four states in the tage of technology,” said Chris McGoey, Midwest. founder of McGoey Security Consulting.

Skimming remains a key concern That said, in 2019, best practices in loss industry wide. For example, thieves prevention still come to down to the are now employing a technique using tried-and-true basics: “close supervision a cellular relay skimmer located in the of employees following clearly defined contactless NFC (near field communi- and articulated procedures to control all cation) reader on the exterior of the types of loses 24/7.” cstoredecisions.com

2/24/19 11:53 AM

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Technology

Point-of-Sale

POS Breaking New Barriers

T

echnological upgrades in new payment technology. Busy Bee, the point-of-sale (POS) systems Madison, Fla.-based convenience store are providing greater flexibil- chain with 18 locations, implemented ity, control and intelligence Apple Pay because it was available from than ever before. Businesses have the company’s POS provider. Now cusmoved from traditional cash registers tomers can use their phones to pay for and stationary credit-card readers to purchases both inside the store and outside at the fuel pumps. mobile- or cloud-based POS systems.

“We did it for the ease of conveT h i s pro l i fer a t ion of m ob ile phones—as well as tablets and nience for our guests,” said Megan smartwatches—gives retailers new Forcey, director of advertising and opportunities to provide faster, more e-commerce for Busy Bee. “We would convenient customer service to time- love to be able to offer more [paycrunched customers. While mobile ment] options at some point.” payments have been slow to take off in the U.S., many convenience retail- PAY TO PLAY ers, including 7-Eleven, Sheetz and Currently, Apple Pay is the most Wawa, now accept mobile payments widely accepted form of mobile payat the POS. ment in the U.S., according to the 20th But it’s not just major chains adopting annual “POS/Customer Engagement

Fast Facts: » Apple Pay is currently the most widely accepted form of mobile payment. » New POS programs are rolling out regularly—all designed to make life more functional for businesses.

Survey,” which was released this year

by BRP, a Boston-based retail-management consulting firm. However, there are a variety of mobile payment brands and apps in the market today, from Google Pay to PayPal to Visa Checkout, and many retailers such as Starbucks offer customers their own mobile payment options.

While customers like the convenience, there are many benefits for POS MOVING TO MOBILE retailers that accept mobile payments.

Over the past two-plus years, more retailers have upgraded or added “It enables customers to make purmobile devices and half the mobile POS devices are less than six years chases without their wallet—but with old. Mobile device usage continues to grow, but at a slower rate, which is their ever-ubiquitous smartphone— perhaps tied to a trend of retailers replacing a portion of their current POS and provides an additional level of hardware with mobile devices when they perform a hardware refresh. security that isn’t available with credit cards, even EMV-enabled cards,” said <2 years 3 to 5 years 6 to 8 years >8 years David Naumann, vice president of Mobile payment marketing for BRP. 36% 16% 7% 2% 45% terminals With mobile payments technology, the retailer never has nor retains the Mobile devices, POS 36% 14% 14% 2% customer’s payment card information, Mobile devices, 34% 18% 14% reducing the security risk and retailer customer engagement liability.

32% 34% 25% 5% POS hardware Look for mobile payments to become more accepted, but at a Mobile devices, 27% 25% 11% 2% back office slower rate than projected in prior surveys, according to BRP. The impetus Fixed payment terminals 25% 46% 14% 11% behind that growth will be retailers POS software 25% 39% 23% 11% upgrading existing POS hardware and software. Plus, it will be important for Store network 25% 39% 56% 9% chains to remain competitive as convenient mobile payment becomes Source: BRP Consulting, 2019 POS/Customer Engagement Benchmark Survey more commonplace.

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Technology

Electronic Payment

Mobile Payments

Becoming Frictionless

B

RP’s 20th annual “POS/ Customer Engagement Benchmark Survey” found 63% of consumers use mobile phones while shopping in stores to compare prices, view offers and check inventory. Meanwhile, 49% of retailers list customer mobile experience as a top customer engagement priority.

“C-stores completing their EMV upgrades at the pump can take a large leap forward with mobile payments at the pump to improve the customer experience,” said Perry Kramer, senior vice president and practice lead, BRP, a retail-management consulting firm.

“Moving towards mobile payments is a low-cost way of offering consumers an experience of being able to pay with their phone and removing the task of finding their credit card and swiping or inserting at the payment terminal.”

FRICTIONLESS EXPERIENCE Amazon is setting the bar high for frictionless payment with Amazon Go stores—where customers scan an app to enter, select items and exit the store, at which point they are automatically billed. Amazon plans to open 3,000 such checkout-free stores by 2021.

“Frictionless payments, mobile

Fast Facts: » In a new report, 49% of retailers list customer mobile experience as a top customer engagement priority. » Amazon is setting the bar high for frictionless payment with Amazon Go stores.

cstoredecisions.com

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MOBILE WALLET WIDENS PayPal and Apple Pay continue to be two of the most widely accepted alternative payment types in retail channels. Fewer retailers seemingly are adopting a wait-and-see approach likely because of the growing support from the mobile payment software ecosystem and the acceptance for these mobile payments by the public.

Currently Accept

Accept within 2 year 50%

Apple Pay MasterCard PayPass

45%

Visa Checkout

43%

Mobile POS payments

43%

PayPal

36%

Google Pay

34%

Chase Pay

28%

Private Closed-Loop Payment Samsung Pay NFC

25% 20%

Wait and See Approach 32%

18%

25%

30%

25%

32%

32%

25%

34%

30%

39% 26% 19% 25%

27% 46% 56% 55%

Source: BRP Consulting, 2019 POS/Customer Engagement Benchmark Survey

applications and loyalty must all be viewed as a single, holistic solution.

Not doing so can significantly jeopardize retailers’ top and bottom lines by impacting total transaction count and units per transaction in the stores,” Kramer said.

Wawa could have added mobile payment to its food ordering kiosks, but that may have deterred impulse purchases as customers walk around the store, he said.

7-Eleven, in November, began piloting Scan & Pay via the 7-Eleven app at 14 stores in the Dallas area, allowing customers to skip the checkout line.

A number of c-stores—including Cruizers, Domino and Enmarket,are

turning to Skip, which aspires to beat Amazon at providing frictionless checkout to 3,000 locations. It was scheduled to roll out to 275 locations by the end of first quarter.

Mike Wilson, director of operations, Holmes Oil Co., which operates 27 Cruizers c-stores in North Carolina, explained how it works.

“Once you download the Skip app, create your account, set up your wallet and walk in the store,” Wilson said.

“The app notifies store employees that you are in the store on a monitor behind the counter. As you shop, you scan the barcode of the items you pick up and pay at the end. Once your payment is accepted, you walk out.”

March 2019 Convenience Store Decisions 89

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Operations

Fuel & Alternative Fuel

Fuels Become

Diverse Commodity

C

onvenience stores sell nearly 80% of the fuel purchased in the U.S. and conduct an estimated 165 million transactions a day, making the industry a good indicator for trends related to travel and consumer spending.

However, car makers, fuel makers and transportation groups are constantly looking at the industry to see how it can further the adoption of ethanol mixes, electrical vehicles (EV), biodiesel, hydrogen and other options.

More and more ethanol blended fuel is at the forefront of the alternative fuels discussion.

American drivers across the U.S. have logged a total of seven billion miles on E15, according to Growth Energy, a fuels trade association.

E15 could double to around 2,700 by late 2019, 2.2% of the estimated 150,000 stations in the country.

“Retailers who are in a contract to sell a particular brand

WEIGHING BIOFUEL VOLUMES On Nov. 30, 2018, the Environmental Protection Agency finalized volume requirements under the Renewable Fuel Standard program for 2019 for cellulosic biofuel, biomass-based diesel, advanced biofuel and total renewable fuel. In 2019, the total volume for cellulosic biofuel will increase to 418 million gallons, a 45% increase from 288 million gallons mandated in 2018.

Source: U.S. Environmental Protective Agency

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of gasoline must receive permission from their supplier to offer E15,” said John Eichberger, executive director of the Fuels Institute. “Recent estimates place the number of retail outlets subject to branded contracts at approximately 50%.

Owners of the brand being sold may not be willing to allow E15 to be sold under their brand for a variety of reasons and this can limit the market expansion of the product.”

Comparably there are nearly 4,300 sites in U.S. selling E85 fuel.

Fast Facts:

STRUCTURING FOR EV

» The number of U.S.

gas stations offering E15 Royal Dutch Shell PLC is could double to around expanding its electric vehicle 2,700 by late 2019. footprint in the U.S. with the February 2019 acquisition of » Royal Dutch Shell is Greenlots, an EV-charging comexpanding its electric vepany based in Los Angeles hicle footprint in the U.S. Bigger chains including Sheetz, Wawa and Maverik are expanding their EV charging station networks as EV production remains a hot topic. Last year, BP purchased Chargemaster, the largest charging network in Britain.

ALLTOWN CONVENIENCE This Alltown Fresh location in Plymouth, Mass. is the first Global Partners location to offer guests EV chargers. As the fresh convenience market, Alltown Fresh is on a mission to elevate the way people shop, eat and fuel at c-stores, said Dylan Remley, senior vice president of terminal operations at Global Partners, Alltown Fresh’s parent company.

The location features fresh food options with organic, gluten-free, vegan, vegetarian and locally-sourced alternatives—all with eco-friendly packaging. It makes sense that there would be a variety of fueling options outside.

The Plymouth store has 12 regular fueling spots in the front of the market, three high-speed diesel-fueling stations in the rear and four Electrify America direct-current fast chargers (DCFC) to serve customers with electric vehicles (EVs).

“With tech savvy Millennials as a primary target audience for Alltown Fresh, it’s become clear to the team that consumers are more devoted to eco-friendly alternatives than ever before,” Remley said. cstoredecisions.com

2/27/19 10:38 AM

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

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Operations

Car Wash

Advancing Car Wash Operations

A

lmost no other bolt-on operation at a convenience store requires such a big capital commitment and promises such a free-flowing revenue steam as a car wash.

Whether a car wash operation is ultimately profitable is based on several factors. However, a growing number of convenience operators are adding their spin on the category.

Technological advancements in equipment, computers and wash mate- ted to the car wash business and being rials are making car washes an enticing directly involved. This is not a handsoption for c-store operators prepared off business,” Space said. “They will need to have car wash educated/ to tackle this add-on business.

Express exterior car washes are trained employees also committed to growing in popularity, in part because the success of the wash. If they do not they boast lower operating costs by approach the operation in this manreducing labor expenses and short- ner it will have an adverse irreversible ening the learning curve for new impact on their car wash business as operators. Often patrons engage with well as the c-store operation.” automated “attendants.”

One option is to buy an existing full- UNLIMITED TIME service wash and convert it to an express C-store operators with car washes wash. The alternative is to build from the are also implementing unlimited memground up, which today, depending on bership programs that allow customers the land prices, averages $3.3 million to to pay membership fees in return for $4 million-plus per location, according receiving unlimited car washes. to Auto Laundry News.

Once customers have signed up Chuck Space, executive director for an a car wash plan, streamlining of Southwest Car Wash Association, them through the wash process is said express car wash operations still straightforward. The most widely used require due diligence to succeed. method is to install a Radio Frequency “Operators will need to be commit- Identification (RFID) tag.

Car washes that will be successful moving forward are the ones that can best meet the customers’ needs, Space said. » Depending on the land prices a “The unlimited passes are successful new car wash can cost $3.3 million in most car wash operations,” Space to $4 million-plus per location. said. “However, if the consumer uses the gasoline purchase to get a dis» Unlimited membership car wash count and the car wash operation is an programs can be profitable for after thought or a secondary business, the unlimited plan may have limited retailers. success” or not be successful at all.

Fast Facts:

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DISTINGUISHING CAR WASHES While there has not been a census on the exact size of the car wash industry, the International Car Wash Association estimates there are nearly 80,000 car wash locations in North America.

Car Wash Type

Number

Tunnels (all types)

28,500

Roll-Over / In-Bay

27,000

Self-Service

24,000

Total

79,500

Source: International Car Wash Association January 2019

Casey’s General Stores, which operates more than 2,000 stores in the Midwest, is mulling the feasibility of such a program at its car wash business, Casey’s Express Car Washes.

“Casey’s has not rolled out the unlimited program at the car wash locations but is actively working towards this,” said Dante Pierangeli, the car wash supervisor at Casey’s Express Car Washes.

Under Pierangeli, the Ankeny, Iowabased retailer currently operates 100 car washes, comprising 15 express exterior tunnels, one flex serve and 84 in-bay locations. cstoredecisions.com

2/26/19 2:23 PM

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Operations

Lighting

Retailers See

ROI with LED

I

n 2019, technological advance- Numerous varieties exist from both a ments abound, offering c-stores price and performance perspective.

Fast Facts: numerous ways to upgrade their The entry level LEDs are extremely » LED bulbs are expected to see businesses. However, LED light- competitive compared to traditional widespread adoption by 2020 in ing may be one of the most profitable lighting even before a rebate is applied. part because utility programs are technologies for c-store retailers to continuing to provide rebates. consider. In the future, LED lighting LED ROI is expected to integrate with beacon Just ask Wesley Campbell, co-owner » LEDs use about 70-90% less technology and the Internet of Things and vice president of retail operations energy than traditional incandes(IoT) allowing new ways to map shop- at Elizabethtown, N.C.-based Campbell cent bulbs, according to the U.S. per traffic and better target customers Oil Co., which includes the convenience Department of Energy. with timely smartphone offers. chain Minuteman Food Mart.

One reason LED is so profitable is In 2018, the company finished retthat it eventually pays for itself, espe- rofitting interior lighting, gasoline cially in states like California that are canopy lighting and exterior area including the maintenance efficiencies associated with high energy prices. lighting with LEDs at its 32 locations. we have picked up,” Campbell said.

LED bulbs are expected to see wideAt the end of 2018, Minuteman was “Some have had paybacks in less than spread adoption by 2020. already beginning to see an energy six months, depending on the market The cost of standard LEDs has rap- savings from the lighting upgrade. and the power company.” idly decreased over the last two years Spencer Miles, president-elect of “We have seen good ROI (returnand most local utilities offer a rebate on-investment) numbers at all sites the National Association of Innovative to help lower the upfront cost as well. on just strictly energy savings, not Lighting Distributors (NAILD), said the ROI is becoming even better, especially as LEDs improve.

LED LIGHTS THE WAY “The LED tube will last twice as long as a traditional fluorescent and use The estimated LED penetration of the U.S. lighting market is supposed to reach 53% this year and 61% in 2020.

50% (less) energy,” Miles said.

LEDs use about 70-90% less energy 80 than incandescent bulbs, according to the U.S. Department of Energy.

70 “The quality is improving con61 stantly,” Miles said. “The LPW (lumens 60 per watt) continues to be more effi53 cient. Two years ago it required 18 50 watts to achieve 1,800 lumens, yet 44 today 10 watts will get you the same 40 35 amount of lumens.”

As IoT capabilities grow and work 30 26 more with lighting, Spencer said store lights will be able to track consumers 18 20 to help owners understand the foot 11 traffic in their stores, what aisles are vis10 6 ited more frequently, offer consumers 2 0.3 1 instant coupons on their smartphones 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 and even pinpoint certain products on Source, Goldman Sachs, Mordor Intelligence’s “Global UV LED Market - Growth, Trends, and Forecast (2019 - 2024)” the shelf.

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/

Operations

ATM

ATM Industry Faces 2019

C

hanges in the ATM industry promise to affect retailers to a certain degree in 2019.

One potential area of change is local legislation.

The ATM Industry Association (ATMIA) announced on Feb. 21, 2019 it’s backing the proposed ban on cashless retail businesses in New York City, Washington, D.C. and Philadelphia.

Cashless stores limit consumer payment choices and discriminate against people without bank accounts or credit cards, ATMIA has said. The organization reports that 45% of shoppers prefer using cash for retail purchases and add that in times of crisis, regardless of the cause, cash is often the only option. Examples for why cash access is vital include power system failures and problems with payment networks.

“The issue is far broader than the poor and unbanked segment of the economy pointed to by these legislative measures,” said David Tente, executive director of ATMIA USA. “Cashless retail severely limits consumer payment choice and eliminates the favored payment method for 26% of the population, according to Federal Reserve numbers.

And, industry data indicates that 45% of consumers prefer using cash for purchases in local retail establishments.”

BOX BRANCH Today’s ATMs can offer “branch in a box” functionality, delivering more than 90% of branch-based technology through an automated channel. That is ideal for today’s onthe-go consumer, said Bruce Renard, executive director of the National ATM Council Inc. The National ATM Council recently joined with the ATMIA in an effort to end the ongoing “damaging impacts” of bank account closures and new account denials in the U.S. independent ATM market.

Continuing advances in technology are allowing for major enhancements in the functionality and capabilities of today’s ATM terminals,” Renard said. “We have seen some

Fast Facts: » Continuing advances in technology are allowing for major enhancements in the functionality and capabilities of today’s ATM terminals. » The ATM Industry Association is fighting against cashless retail businesses, which limit payment options, a potentially dangerous issue in times of crisis. cstoredecisions.com

90-95_Operations.indd 95

CASH STILL IN USE Though a majority of Americans prefer to use debit cards for everyday purchases, a healthy proportion of consumers still prefer to use cash, indictaing a continuing need to support the ATM category.

100% 16%

80% 60%

54%

19%

40% 5%

20% 0%

37%

27%

23% 17%

17%

19%

28%

23%

18-24

25-34

Cash

25%

24%

Check

31%

32%

33%

33%

35-44

45-54

55-64

65+

Credit

Debit

Electric

Other

Source: the Diary of Consumer Payment Choice (DCPC); the Federal Bank, December 2018.

financial institutions introduce ‘video teller’ ATMs. In addition to a live, real-time, two-way video chat between you and the remote video teller, these terminals have capabilities to scan your driver’s license, give change and provide access to banking services well beyond normal bank hours.”

He explained that these options are large, complex and costly with longer wait times, however.

In-store ATMs are experiencing a tech revolution of their own, with new capabilities to provide tracking/demographic information, and abilities to issue electronic gift cards and effectuate card-less transactions, Renard said.

In many parts of the country where cash is still king, everyday ATM services fit the bill.

Des Moines, Iowa-based Git N Go Convenience Stores chain, which has more than 40 locations in Iowa and Illinois, includes ATMs as a viable connection to its customers, who rely on their ATMs for ready cash.

William Baine, CEO of Git N Go Convenience Stores, said the c-store chain averages more than 1,500 transactions per month, per ATM. March 2019 Convenience Store Decisions 95

2/26/19 3:20 PM

PRODUCTShowcase On-Pack Transparency

Soft Energy Chews

Bud Light has become the first beer in the U.S. to add a comprehensive on-pack serving facts and ingredient label, with the unveiling of a new secondary packaging design that hit stores in February.

In every aspect of their lives, people are demanding more and more transparency, and Bud Light wants beer drinkers to have more information when it comes to choosing their brew, right at their fingertips on the packaging. Bud Light is striving to elevate the beer category with this move toward more transparency. In addition to listing the ingredients, the packaging will also include: serving size, calories, total fat, saturated fat, trans fat, carbohydrates, sugars and protein.

Company: Anheuser-Busch www.budlight.com

Big Time Energy is launching a new line of energy soft chews featuring three flavors: chocolate, chocolatemint and chocolate pomegranate. Quick, simple and effective, each chew has a proprietary energy complex plus 50-milligrams of caffeine. It’s a great alternative to canned drinks and shots. The chews are packaged in a convenient and secure plastic tube, which is easy to take with you. There are six chews per tube. Each counter top display comes packaged with eight tubes. Big Time Energy soft chews are the perfect pick-me-up for a long day or whenever you need a Big Time boost.

Company: Big Time Energy (727) 742-6351

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Organic Kombucha KÖE is introducing a line of organic kombucha that is great-tasting and easy to drink. Every can of KÖE is light, bubbly and full of flavor, and made with the highest quality organic ingredients. Authentically fermented, KÖE is a functional beverage made from kombucha (fermented tea), a long beloved drink among the health-conscious community. Whether it’s fresh and tangy Lemon Ginger, exotic, enticing Mango, refreshing Raspberry Lemon, plump Blueberry Ginger or silky, soothing Raspberry Dragonfruit—all flavors of KÖE are USDA organic, non-GMO project verified, vegan, gluten free, kosher certified, non-alcoholic and made without any artificial sweeteners. It’s the better-foryou alternative to heavy sodas with highfructose syrup, and the friendly, delicious version of traditional kombucha.

Company: Stratus Group Beverage www.koekombucha.com

Cinnamon Crepes St Pierre introduced Cinnamon Filled Crepes to its portfolio in February. The new flavor joins the already popular Chocolate & Hazelnut Filled Crepe. Made in the heart of France using traditional recipes, the lace thin crepes are carefully rolled around a decadent cinnamon filling and individually wrapped for the perfect on-the-go snack. To improve on-shelf display and drive impulse purchases, St Pierre has also launched new shelf-ready packaging for the crepes. Both flavors will now be available in packs of eight in shelf-ready packaging for easy in-store merchandising.

Company: St Pierre laure_leger@kltglobal.com

cstoredecisions.com

2/24/19 11:33 AM

PRODUCTShowcase Plant-Based Creamers The natural bliss line of all-natural dairy and plant-based creamers is unveiling two new dairy-alternative creamers. The new natural bliss Half and Half blend of almond milk and coconut cream, and natural bliss Oat Milk creamer include easy-to-pronounce ingredients like almond milk, coconut cream and natural vanilla flavor with extracts from Madagascar vanilla. New natural bliss Half and Half, Oat Milk and Toasted Coconut creamers are now available nationwide in one-ounce bottles for an MSRP of $3.49, $3.29 and $2.79, respectively.

Company: Nestlé www.coffeemate.com/products/natural-bliss

Protein & Energy Protein2o, a low-calorie protein beverage water, is launching Protein2o Plus Energy, which boasts 125 milligrams of caffeine in addition to 15 grams of protein. Like all of the brand’s products, Protein2o Plus Energy is made with 100% whey protein isolate and natural flavors and is preservative, gluten and lactose-free; the caffeine it contains is derived from green coffee beans. Protein2o Plus Energy is available in two flavors, Blueberry-Raspberry and Cherry Lemonade. It has only 70 calories per 16.9-ounce bottle. Both flavors began to appear on grocery, convenience and drug store shelves starting in February.

Company: P rotein2o www.drinkprotein20.com

HVAC/R Systems Emerson has launched ProAct Connect+, an enterprise software suite that assists supermarket and convenience store operators with continuously monitoring and controlling HVAC/R systems to help them meet financial, regulatory and brand management objectives. By providing key stakeholders—including facility, asset and energy managers, commissioning agents and field service technicians—with a suite of powerful but easy-to-use applications, critical business objectives can be completed faster and with improved outcomes. ProAct Connect+ features a robust bundle of more than 50 functions designed to simplify, accelerate and automate the management of complex HVAC/R assets. From a central location, one person can monitor thousands of sites and quickly identify areas either operating or drifting out of range (e.g., temperature) and take corrective actions.

www.emerson.com/en-us/commercial-residential/proact

96-99_MARCH_PS.indd 97

Chobani LLC is launching the company’s first-ever plantbased recipe Non-Dairy Chobani to give people looking for non-dairy products a delicious option that’s packed with probiotics, less sugar than other non-dairy brands and contains only natural ingredients. Starting this month, Chobani is rolling out nine new Non-Dairy Chobani cultured organic coconut products that will be available nationwide at grocery and retail stores. Like all Chobani products, NonDairy Chobani are made using only natural, non-GMO ingredients, and no artificial flavors, sweeteners or preservatives to adhere to our authentic Chobani craft and food philosophy. Non-Dairy Chobani name and packaging also represent Chobani’s advocacy for transparency as it pertains to better aligning food standards of identity. As an independent food company, Chobani is taking a leadership role in advocating for transparency in dairy and clear distinctions between milk-based foods, such as yogurts, and other options like Non-Dairy Chobani cultured organic coconut purees. SRP: $1.99 per 5.3-ounce single-serve cup and $2.49 per seven-ounce single-serve drink.

Company: Chobani www.chobani.com

Company: Emerson cstoredecisions.com

Yogurt Alternative

March 2019 Convenience Store Decisions 97

2/24/19 9:36 PM

PRODUCTShowcase Bold, Refreshing Beer

Retro Gum Brands Gerrit J. Verburg Co. inspires consumers to “taste the memories” with the reintroduction of retro gum brands Black Jack, Clove and Beemans chewing gum.

Black Jack Chewing Gum holds the distinction of being the first flavored gum in America and the first gum sold in sticks, introduced in 1884 as Adams’ Black Jack, according to legend. With a burst of licorice flavor capturing the taste buds with each chew, it has been an enduring nostalgic American favorite for more than 130 years. Beemans Chewing Gum originally was marketed as a digestive aid in the late 1800s. Clove Chewing Gum gained popularity during prohibition for its ability to mask the smell of alcohol on the breath. Offering a spicy floral flavor, clove gum was invented by the Thomas Adams company in 1914. Each pack contains five sticks of gum, and there are 20 packs per display box. Convenient Counter Displays contain two boxes of each flavor, for a total of 120 packs of gum, with six counter displays shipping per case.

Company: Gerrit J. Verburg Co. info@erritJverburg.com

Tecate launched a 7.5% ABV (alcohol by volume) brew last month in a single-serve 24-ounce can created specifically for sale in licensed offpremise accounts— specifically convenience stores—to capitalize on the growth of high ABV beers in this channel. Tecate Titanium delivers a bold, yet refreshing taste that packs a punch. Its distinct aroma and flavor are the result of an obsessive and tireless brewing process that results in higher alcohol content and refreshing drinkability. This new brew enters a market segment where total 6.5%+ABV products are growing 10.1% and singles cans are growing 11.6%, (Nielsen AOD, YTD ending July 14, 2018). The launch program will include OOH, radio, digital and social media in Tecate’s top markets as well as high-impact merchandising materials and consumer sampling (where legal), all to drive trial and awareness. Tecate Titanium is a bold new entry that offers c-store operators a growth opportunity and Hispanic c-store shoppers a bold new choice in a high ABV Mexican Import.

Company: HEINEKEN USA www.heinekenusa.com

Protein Chocolate Bar ONE Brands has introduced a new protein bar flavor: Dark Chocolate Sea Salt. With the new year comes a new flavor for ONE that complements the brand’s current portfolio of decadent bars, such as Birthday Cake, Maple Glazed Doughnut and Almond Bliss.

The latest addition to the ONE roster features the company’s signature 20 grams of protein and only ONE gram of sugar per serving to help customers kick-start their New Year’s resolutions and get salty. The flavor delivers delicious dark chocolate for a perfect on-the-go snack. The new bars retail for a SRP of $2.49-$2.79.

Company: ONE Brands www.one1brands.com

CBD Sports Water Puration Inc. has introduced new EVERx CBD Sports Water Bullet Bottles to ring in the new year. EVERx has been undergoing an all around update after reaching over a million dollars in annual sales. The EVERx logo has been refreshed, with patented cannabis extraction partner Kali-Extracts, the EVERx formula has been improved, and with copacker partner Alkame Holdings, and their new state-of-the-art bottling production line, EVERx now has an entirely new bottle.

Kiwi Strawberry and Lemon Lime flavors are now available in addition the Original EVERx CBD Infused Sports Water. EVERx has more than twice the CBD of most CBD infused waters on the market. A proprietary technology enables EVERx to suspend more CBD than its competitors and still have a crystal-clear appearance and a refreshing taste.

Company: Puration www.purationinc.com

98 Convenience Store Decisions March 2019

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2/24/19 9:36 PM

PRODUCTShowcase Marketing with Water

Sweet Cream Cigarillos The irresistible combination of smooth cream and taste of exotic vanilla are now available as your favorite cigarillo. Swisher Sweets Limited Edition Sweet Cream cigarillos provide a desirable blend of cream and vanilla for the ultimate sweet taste.

Available for a limited time in a resealable two-count pouch with the “Sealed Fresh” guarantee, Swisher Sweets Sweet Cream is ready for shipment to stores nationwide. It is offered in “two for 99 cents,” “save on two” and “two for $1.49” options.

This product is also available in a “two for $1.29” option for selected markets. Swisher Sweets Sweet Cream is sure to quickly become a customer favorite and is available only while supplies last. To place an order, contact your Swisher representative.

Company: Swisher Sweets (800) 874-9720 swisher.com/cigars-cigarillos

MSP Inc., one of Colorado’s local beverage suppliers, has introduced ELITE WATER with SPINLABELS. ELITE WATER bottles with SPINLABELS are the next generation in crossmarketing to customers and will transform retailers’ bottled water sales into a dynamic and flexible marketing platform unlike ever before. Any retailer and other businesses that offer bottled water can increase customers’ impulse buys up to 5X just from a single bottle of ELITE WATER. Each bottle of water includes five inner ad panels, allowing for multiple promotional opportunities from a case or single bottle of ELITE WATER. ELITE WATER bottles use a patented ‘2-n-1 label’ where the outer label with a window spins over inner label ads allowing for impulse buys a retailer wants to offer at POS. A retailer can add their own in-store and/or manufacture coupons along with dynamic QR codes, text and images on each ELITE WATER bottle.

Company: ELITE WATER Contact Daniel Rogers, Vice President of Sales, (303) 955-6452

Spring Seasonal Lager Jack’s Abby Craft Lagers released a brand-new spring seasonal across its markets starting Feb. 1. Deep golden in color, this Pilsner-style lager is bursting with aromatic American Hops. By using Citra Hops throughout the entire brewing process, Citra Brau has a tropical, fruity flavor and juicy finish. ABV: 5.5. IBUs (International Bitterness Units):12.5.

Company: Jack’s Abby Craft Lagers www.jacksabby.com

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Diet Coke Flavors Diet Coke is jumpstarting 2019 with the release of two bold new flavors: Strawberry Guava and Blueberry Acai. These two flavors are the newest delicious boost to the existing flavor line up.

Diet Coke Blueberry Acai and Diet Coke Strawberry Guava were selected from a shortlist of 20 options and tested with more than 2,000 Americans.

The new flavors will offer even more variety to the existing Diet Coke lineup, which also includes Ginger Lime, Feisty Cherry, Zesty Blood Orange and Twisted Mango. They aim to satisfy adventurous fans’ thirst for bolder tastes and more dynamic experiences. The new flavors are now available in sleek, modern 12-ounce cans and can be purchased as on-the-go singles or in eight-packs.

Company: The Coca-Cola Co. www.coca-colacompany.com

March 2019 Convenience Store Decisions 99

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Classifieds /Ad Index Apter Industries 800.441.7146 / www.apterindustries.com

25

Bob’s Red Mill www.bobsredmill.com/food-service

19

Calico Brands 800.544.4837 / www.calicobrands.com

81

Car Wash Show www.TheCarWashShow.com

93

CB Distributors 888.824.3256 / www.cbprices.com

5, 7

Cheyenne 866.254.6975 www.growingtobaccoprofites.com Click It www.clickit.com

71 87

Coca Cola 800.241.COKE www.cokesolutions.com/want-to-serve-coke Core-Mark www.core-mark.com/food-service/

Danone 888.620.9910 www.DanoneAwayFromHome.com

Del Monte Fresh 800.950.3683 / www.freshdelmonte.com E & J Gallo www.gallo.com

49 39

17, 47 43 55

E-Alternative Solutions 877.373.0069 / www.LeapVapor.com

77

FIJI Water 888.426.3454

North American Bancard 866.481.4604 / www.nynab.com

11

Hershey www.HersheySolutions.com

NRF Protect 2019 www.nrfprotect.com

67

Home Market Foods 41 800.367.8325 / www.HomeMarketFoods.com Hunt Bros.

800.453.3675 www.huntbrotherspizza.com/CSD

Liggett 877.415.4100

Little Debbie 800.315.6208 / www.LittleDebbieCStore.com Mars Wrigley Confectionary www.mars.com

MasonWays 800.837.2881 / www.masonways.com The NAMA Show 2019 www.thenamashow.org

14

35

Smokey Mountain www.SmokeyMountainSales.com

73

69

Swedish Match 800.367.3677 www.zyn.com www.gamecigars.com www.swedishmatch.com

Restaurant Loss Prevention & Security Association Annual Conference 3 www.RLPSAannualconference.com

9 65

Swisher 800.874.9720 www.swishersweets.com www.hempire.com

101 16

National Retail Solutions 833.289.2767 / www.nrsplus.com National Tobacco 800.331.5962

13

Raybern’s www.rayberns.com

79

Krispy Krunchy 800.290.6097 / www.krispykrunchy.com

45

Prairie City 800.338.5122 / www.pcbakery.com

12

JUUL www.juul.com

80

Pierce 800.336.9876 / www.poultry.com

37

IRI Summit www.IRIGrowthSummit.com

100

23 59 75 29 104

U.S. Smokeless Tobacco

2

VPR Brands 954.504.9086 / www.cbdgoldline.com

101

White Castle 614.228.5781 / www.whitecastle.com

21

15 103

No Assembly Required

Emergency Spill Centers

Windshield Service Center Bases for Beer Caves Storage & Display

www.masonways.com 800-837-2881 cstoredecisions.com

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March 2019 Convenience Store Decisions 101

2/25/19 11:05 AM

INDUSTRY

Perspective

Interesting Retail Discoveries Alternate uses of retail spaces, which incorporate motor fuels and don’t involve razing and rebuilding the store, tend to stand out.

By Mark Radosevich

A

vendor recently sent me a 2019 calendar featuring graphics of gas stations from a bygone era.

Not one of those months featured an old convenience store. It seems like bay stations are part of Americana, whereas little nostalgia is attributed to c-stores.

As the industry continues to mature and becomes more sophisticated, an increasing number of antiquated stores will either find alternate commercial uses or join their shuttered brethren littering various communities.

Unique are alternate uses that incorporate motor fuels and don’t involve razing and rebuilding the store. I discovered an example of just that when visiting Colorado Springs last year for a branded marketer event.

GAS & GRASS While navigating the city trying to find a restaurant, we happened upon a Native Roots retail site, with its Gas & Grass retail brand. This location is actually both a gas station and a medical marijuana dispensary, and the company, Native Roots, said the venture is the “first dispensary in the world” to combine the two services.

This three-store medical marijuana distributor recognized the value of property location and existing configuration that were lost as marginal conventional c-stores. The dispensary follows all state-mandated rules, meaning unless you have a medical card, you won’t get in.

The company’s novel branding and design treatment was creative and effective, yet economical to purchase and deploy.

Although the exterior looks like a traditional cstore, the interior has been totally retrofitted. The entry opens to a small waiting room with a glass partitioned desk. A doctor’s prescription is needed for access, where customers have a selection of various product incarnations.

102 Convenience Store Decisions March 2019

102_Industry Perspectives.indd 102

Mark Radosevich is a strong industry advocate and 39year petroleum professional.

He is president of PetroActive Real Estate Services, LLC, offering confidential mergers & acquisition advisory, representation and financing services exclusively to petroleum wholesalers. Contact him at mark@petroactive.net or call (423) 442-1327. His professional bio and other company info can be found at www.petroactive.net.

The site manager said plans were underway to convert the adjoining vacant quick-service restaurant (QSR) space into a Tshirt and apparel shop to leverage the popularity of the Grass & Gas brand. The fueling part of the business is unattended.

She added the company plans to expand into other markets, with conversion of existing c-stores as their easiest point of entry due to their optimal locations, wide availability and relatively low cost for fee simple ownership.

DOLLAR FOLLOW-UP In past articles, I’ve noted the widespread expansion of dollar stores and the potential negative impact to traditionally stable rural c-store operations. And, as I have mentioned before, there are two primary dollar store competitors: Dollar General and Dollar Tree, which acquired the Family Dollar chain a couple of years ago.

Each company operates about 14,000 locations.

Store sizes typically run around 7,500 square feet but can go as high as 10,000 square feet.

Over the past years, both chains have added beer and cigarettes, which begins to cross over into traditional cstore territory. Research shows that the addition of cigarettes increased customer counts.

I’ve indicated in past writings that both companies typically target rural unincorporated areas on well-traveled roads or in underserved small towns.

The key differentiator between the two businesses has been fuel and food. During a trip through southern Georgia last year, we stopped at a nationally-branded dollar store with fully-integrated fueling under a branded canopy.

National expansion of this motor fuel configuration will surely impact nearby c-stores and leave “food” as the only remaining differentiator between the two businesses.

C-stores without a viable QSR may become irreparably challenged and destined to find alternate uses, or become another boarded-up building lacking in nostalgia.

cstoredecisions.com

2/26/19 1:33 PM

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