Convenience and Petroleum Retailing Industry Update: Facts, Figg,ures, and Best Practices to Help You Succeed in the Coming Months Ahead
July 28, 2009 TdToday…
Abou t NACS About our Industry UdUnders tandi ng consumers Changing operator landscape Different iat ion ABOUT NACS About NACS Founded in 1961 More than 2,000 retail member companies – Operating more than 75,000 stores in the US – Operating more than 300,000 stores globally – Members in 49 countries –49 of the 50 largest companies in the industry – 79% of our US members operate 10 or fewer stores –Increasingly diverse retail membership • Jack‐In‐The Box, Delta Sonic, Kroger, Publix, Giant Eagle, Follett College Book Stores, TA Travel Centers • PetroCanada, Quickie Convenience Stores, Tesco, BWG, Topaz, Welcome Break, Total, Pick n Pay, Seicomart, Dairy Mart, Famima, PTT, Woolworths AU, Coles Express, JMEL, OXXO, Repsol, Ipiranga More than 2,000 supplier member companies NACS’ three pronged focus Knowledge – State of the Industry (SOI) Data through CSX – Support of Technology standards (PCATS) – Industry research – Educational products –NACS Magazine & NACS Daily – NACS Help Desk Connections –The NACS Show – NACStech Show –SOI Summit –HR Forum – Category Management Conferences –NACS Global Forum & Study Tours –NACS Social Media Advocacy – Government Relations –Media Relations ABOUT OUR INDUSTRY About our industry Our 145,000 stores… = 50,000 more than: Warehouse clubs+ Supercenters + Dollar stores + Mass merchandise stores + Supermarkets + Drug stores Over 90,000 of stores are run by single store operators Our 2008 sales totaled US$624.1 billion equaling over 4% of the US GDP 160 million transactions per day –Every 40 hours the industry serves the equivalent of the entire mobile population of America (6 years to 85 years old) 98% of Americans shop at c‐stores once/month We sell 80% of the motor fuel sold in the U.S. About our industry We employee over 1,700,000 million workers on the retail side alone Some of our members made Fortune Magazine’s 100 Best Companies to Work For in the USA in 2008 –#27 (QuikTrip) –#93 (Valero Energy) We have stores in every congressional district Our stores are physically closer to the homes of America than any other channel of trade – We are the “neighborhood” store We are the mosaic of America –Every race, creed, gender, income, age Industry Snapshot
2007 2008 Change
Industry Stores 146,294 144,875 (1.0)%
Industry Sales $577.4B $624.1B 8.1%
Industry Pretax Profit $3.4B $5.2B 54.2%
Credit Card Fees $7.6B $8.4B 10.5%
Number of Employees 1,714,300 1,727,700 0.8%
Fuel Pool Margin (cpg) 14.6¢ 18.0¢ 23.3%
Source: NACS State of the Industry Survey of 2008 data powered by CSX Industry Store Count Declines
160,000 145,119 146,294 144,875 138,205 140,655 132, 424 140, 000 130,659 124,516 119,751 120,000 55,162 55,611 55,308 53,435 56,081 54, 029 54,615 100,000 56,904 59,876 80,000 y Store Count Store y rr
60,000 Indust
90,683 84,770 84,574 89,957 89,567 40,000 78,395 76,044 67, 612 59,876 20,000
- 2000 2001 2002 2003 2004 2005 2006 2007 2008
Single Stores Chain Stores Source: TDLinx, a service of the Nielsen Company Store Growth by Firm Size 160
150
140 Single stores +50% since 2000
130
120 Total stores +21% since 2000 110
100
90 " Chain" stores ‐8% since 2000 80 2000 2001 2002 2003 2004 2005 2006 2007 2008
Source: TDLinx, a service of the Nielsen Company 30 Years of Industry Sales
$600.0 Motor Fuels Sales Inside Sales $624.1 Billion $500.0 .2 $400.0 00 $45 $408.9 $405.8
$300.0 $344.2 llars in Billions 2.6 oo 66 D $2
$200.0 $220.8 $181.3 $171.0 $165.3 $134.2
99 $100.0 $173. $168.5 $163.6 $151.1 $132.1 $116.2 $112.0 $99.8 $109.3 $104.1 $0.0 66 77 88 99 00 11 22 33 44 55 66 77 88 99 00 11 22 33 44 55 66 77 88 99 00 11 22 33 44 55 197 198 198 198 198 198 198 198 198 198 198 199 199 199 199 199 199 199 199 199 199 200 200 200 200 200 200 200 200 200
Source: NACS State of the Industry Survey of 2008 data powered by CSX Wish the guy who thought it was a good idea to post prices tried milk instead…
Skim Milk 2% Milk Whole Milk Core Direct Store Operating Expenses
Per Store/Per Month 2007 2008 Change
Wages & Benefits $17,813 $18,245 2.40%
Utilities $3,667 $3,965 8.10%
Repairs & Maintenance $2,837 $3,016 6.30%
Supplies $1, 102 $1, 118 1. 50%
Total DSOE $34,086 $36,060 5.80%
Source: NACS State of the Industry Survey of 2008 data powered by CSX Interchange Rates
USA 1.75%
India 1.10%
Brazil 1.00%
HK 1.04%
NZ 0.95%
Sweden 0.90%
Italy 0.90%
UK 0.79%
Denmark 075%0.75%
EU Crossborder 0.70%
Australia 0.45% SMhtSource: Merchant Payment s C oalliti on
0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1.20% 1.40% 1.60% 1.80% 2.00% Interchange Rates Increased to Highest Level Ever –Now Over 2% $4.50 Effective Interchange Paid v. Gas Prices 2.50% $4.00
EIA Gas Prices 2.30% tions d aa 2.10% CPP Rate 3.00 $3.50 ll grades/formul change Rate Pai ss $$ rr aa
Moderate inverse relationship 1.90% $2.50 Effective Inte Effective Visa Change Structure ice per gallon - ice %% Pr Visa Announces “relief to consumers”
Highly inverse relationship 0 $2.00 %1.70 55 00 $1. 1.5
Source: NACS Card Processing Program $10. 0 Card Fees vs. Pretax Profit
$9.0 $8.4 Billion $8.0 $7.6
llars $7.0 $6.6 oo
$6.0 $5.9 ns of D $5.0 $5.2 Billion oo $5. 0 $5.4
Billi $4.0 $4.0 $4.8 $3. 8 $3.0 $3.2 $3.4
$2.0 2003 2004 2005 2006 2007 2008
Source: NACS State of the Industry Survey of 2008 data powered by CSX UNDERSTANDING CONSUMERS bub∙ba (bŭb'ə) noun, slang: 1. A white working‐class man, stereotypillically regarddded as undereducated and gregarious with his peers.
2. A man of the Southern U.S., variously characterized as easygoing, companionable, assertively masculine, etc. bub∙ba (bŭb'ə) song, Rascal Flatts: Bubba is a friend, he`s a beer drinkin` buddy of mine But lately somethin` s happened that ain` t hard to define Bubba`s got himself a cousin and I`m gonna make her mine And she`s brushin` both his teeth And she`s makin` him biscuits and ggyravy I just know it And she`s lovin him in that double wide late late at night
Y`know, I wish that I had Bubba`s girl I want Bubba`s girl Why can`t I find a cousin like that? Like bubbas girl I want I want Bbb`Bubba`s gilirl Why can`t I find a cousin like that! Understanding consumers Bubba: Age: 18‐55 years old Cultural influences: Beer, NASCAR, pick up trucks, cigarettes, beer, baseball, beef jerky, football, beer, dip, mom, hunting dogs… Brand loyalty measured in: a lifetime The industry's stereotypical customer profile There’s more to operating a successful convenience and petroleum retailing site than just catering to Bubba… Understanding consumers
Consumer Demographics: Understanding consumers
According to Nielsen, our customers are primarily: Lower income households Single households Households without children African American households Struggling urban, modest working towns & rural living Blue collar & currently not in workforce All age households and male only households UdUnderstandi ng consumers
Beyond Bubba:
Different types of shoppers value different shopping experiences, and retailers that best tap into these values and shoppers' needs will capture a greater share of the convenience business, which is no longer confined to c‐stores outlets, according to Fast Forward: Emerging Opportunities in Convenience Retail, a new report from the NACS/Coca‐ Cola Retailing Research Council. UdUnderstandi ng consumers
Beyond Bubba ‐ Fast Forward: Emerging Opportunities in Convenience Retail
The NACS/Coca‐Cola Retailing Research Council identifies three types of c‐stores: Neighborhood stores, considered an essential part of the community, whose customers live close by and shop for fill‐in items and specific category purchases Commuter stores, located on high‐traffic thoroughfares and shopped mostly by blue‐ and white‐collar commuters who buy fuel, drinks and tobacco and value safety, cleanliness, easy access and competitive fuel prices Interstate stores, positioned on major highways and frequented by long‐ distance travelers, professional drivers and locals who buy fuel, meals, snacks and beverages, and value nice restrooms. UdUnderstandi ng consumers
Beyond Bubba ‐ Fast Forward: Emerging Opportunities in Convenience Retail To better customize their products and services, retailers need to better understand various types of shoppers, the report concluded. They were identifi e d as: Drop‐In Daily customer, or the familiar "Bubba" who drops in daily as a break from work The Local Loyalist, who thinks of the stores as the center of the neighborhood The Over‐Stretched Mom, who shops on the way home from work to fill in the gaps The Mobile Professional, who stops in during the commute for coffee and competitively priced gasoline; The Highly Hesitant, who visits for snacks, but otherwise avoids c‐stores The Long‐Distance Driver, who drives for a living and wants familiar brands of gasoline and clean bathrooms UdUnderstandi ng consumers
Gen Y & beyond: Born Between: 1977 and 2002 Age: 7‐32 years old Cultural influences: dot‐com bust, Internet, September 11, mp3, Iraqi War, Paris Hilton, Facebook, Twitter Brand loyalty measured in: Days UdUnders tandi ng consumers
Teens ((gAges 14‐20): A teen participant of the NACS/Coca‐Cola Leadership Council Teen Study was asked why he chose a specific store over another. He responded: “It's close, and I needed gas and a Hershey bar and a Coke.”
Notice the description wasn't a "candy bar and a drink." Understanding consumers
Check your oil? Understanding consumers
Check your oil? Understanding consumers U.S. youth btbetween 12 an d19d 19 each spend on average almost $100 per week or about $180 billi on Check your oil? total per year Understanding consumers Gen X (baby bust): Born Between: 1965 and 1976 Age: 33‐44 years old Cultural influences: television, Atari 2600s, personal computers, grunge, health, the environment, latch‐key kids Brand loyalty measured in: It depends on… –Loyal to brands that perceive responsibility over status – Disloyal to brands that perceive status above responsibility Understanding consumers Gen X (baby bust): Loyal to brands that perceive responsibility over status – Honda – Apple Disloyal to brands that perceive status above responsibility –Rolex – Hummer Understanding consumers
Baby Boomers:
Born between: 1946‐1964 Age: 42‐60 Cultural Influence: The 1960s, Vinyl, Vietnam War, Kennedy Assassination, Woodstock, Easy Rider, Moon Landing Brand Loyalty Measured in: Years Understanding consumers Baby Boomers: First “ME” generation – driven by wealth and success –After growing up rebelling against their parents’ wealth and success… By the end of this year, they will reportedly spend $3 trillion a year Understanding consumers
Baby Boomers: While mostly “brand fixed,” still just as likely to switch brands as younger buyers 33% of consu mers older than 50 agree it is “risky ” to buy an unfamiliar brand 36% of consumers 16‐34 feel the same way 30% of consumers 35‐49 Understanding consumers
Baby Boomers: Woman make the vast majority of purchasing decisions – spending trillions of dollars each year. And one huge segment of this demoggpraphic wields
more spendingCheck yourclout oil? thank any other: Boomer Women between the ages of 41 & 60. Women are going to control two‐thirds of the consumer wealth in the US over the coming decade. Over the same period of time, the Boomer woman demographic will grow 30 percent. We know they buy 20 oz bottles of Diet Coke…and fruit, pizza, milk, and candy bars…why don’t they buy them from convenience stores? Understanding consumers Baby Boomers:
Today, this is the generation that knew better than their cautious, fuddy‐duddy parents The generation that protested, that had ideals and marched to the beat of defiant music: "Street Fighting Man," "We Want the World and We Want It Now," "Hope I Die Before I Get Old.“ Understanding consumers Baby Boomers:
It's the generation that pursued pp,leasure, proclaimed "I can have it all" and refused to grow old ‐‐ “60 is the new 40," etc And now, after years of taking credit for changing the world, baby boomers are taking the rap for the reversal of fortune that's shaking the world Understanding consumers Cuspers (“late boomers”):
Born roughly between 1954‐1965 – Barack Obama, born 1961 – Sarah Palin, born 1964 Value traditional notions of family but see men and women as equals in parenting Go back to older American values ‐‐ civility, community, responsibility ‐‐ yet keenly embrace technology and use the Internet naturally Understanding consumers Cuspers (“late boomers”):
For marketers, they are a fast‐ emerggging challenger brand that's fascinating to watch as it defines itself and attracts fans. Cuspers define themselves by what they’re not: greedy, selfish, confrontational, hung up on past battles. Understanding consumers African Americans:
By 2050, African Americans will account for 14.6% of our nation’s population, increasing 71% In 2008, African American buying power increased to 921 billion dollars – 189% increase over the last 18 years
Source: U.S. Census Bureau Understanding consumers African Americans: In 2001, 27% of married couple families earned $75,000 or more By 2004, 31.4% of single adults were earning $50,000 or more 80% of adults have earned at least a high school diploma 65% are in the workforce
Source: U.S. Census Bureau Understanding consumers “The store in the African‐American market is brand, brand, brand, brand.” ‐ Cathy Von Frange
Partner, Yankelovich Market Research Understanding consumers African Americans: Use brands as a badge or symbol Makes them more assured there will be quality and service behind a brand name
Source: “Power Play,” Alison Embry of Convenience Store News Understanding consumers Asian Americans: Extremely brand loyal, especially the younger generations Brands as badge of status However, can be very fickle and switch brands often and easily, but usually return to the original brand
Source: 2007 VNU Business Media, Inc. Understanding consumers
“I believe the good brand name always has the good quality.” ‐ Zhi Ying, Asian American
Source: 2007 VNU Business Media, Inc. Understanding consumers
Check your oil? Understanding consumers
% of Total U.S. Rank by # % of State Pop Hispanic. Pop of c-stores 1. California 35.1% 29.2% 2
2. TexasCheck your oil? 36.9% 19.3% 1 3. Florida 19.8% 8.1% 3 4. New York 15.6% 6.9% 4 5. Arizona 31.4% 4.3% - 6. Illinois 11.9% 3.5% 10 7. New Jersey 16. 1% 32%3.2% - 8. Colorado 20.1% 2.1% - 9. New Mexico 43.7% 1.9% - 10. Washington 6.9% 1.0% - UdUnders tandi ng consumers
Rank by # of c-stores #6 1. North Carolina +394% Established Metros New Destinations 2. Arkansas +337% 60% Check your oil? #5 3. Georgia +300% 52% 4. Tennessee +278% 5. Nevada +217%
19% 6. South Carolina +211% 14% 7. Alabama +208% 8. Kentucky +173% 1990 2000 UdUnders tandi ng consumers
Check your oil? Bottom line...
Bubba is not the only customer in town…and you better get to know yours and cater to their needs – Teens – Gen X & Y – BoomersCheck your oil? – Cuspers – Boomer Women –African, Asian, & Hispanic Americans – Military –Tourists –Truckers – Stay at home Moms –…and more! CHANGING OPERATOR LANDSCAPE Industry consolidation M & A Activity 2005 ‐ 2008 Over 200* convenience and petroleum retailers were acquired totaling more than 6,000 stores.
Major oilCheck companies your oil? are divesting company owned and operated sites FlFuel replacement costs and credit card fees have ddiriven dozens more out of the business just this year. 90,000 of the 145,000 + convenience and petroleum sites are operated as single store operations.
*Companies with 30 or more stores Industry consolidation
Consolidation and divestiture –Small to mid‐sized companies are acquired ; new owners divest less profitable | desirable locations. –More operators became adept at rationalizing their site portfolios and sold or leased less profitable | desirable locations to dealers – Integrated Oil Companies quit the retail business and divest to chains and jobbers – 7‐ELEVEN and am|pm move to total franchise models Changing operator landscape New Americans New Americans continue to grow in both presence and influence in our industry. A strong work ethic and sense of accomplishment helps immigrants take control of their own destiny. Check your oil? Immigrants from places like India or Pakistan have two chihoices when they arrive in this country: fin d a jbjob or own a business. In other countries retail is considered one of — if not, the most — honorable professions, at a similar level of how doctors or lawyers are respected in the U.S. Retailers in these areas are perceived as the people who most help their communities. Small operator profiles
Influx of immigrants to the industry – India – Pakistan –Korea – Egypt | Jordan | Lebanon | Iran –Eastern Europe Many small operators were college educated, had previous business ownership experience, or both Small operator profiles
Small operators owned the majority of their sites while the rest leased –Majority sold fuel Most had little to no understanding of fuel marketing when entering the business –…other than US‐born “mom & pops” who grew up in the business Small operator characteristics
We identified two major types of small business operators –The Shopkeeper (majority) –The Entrepreneur (minority) Small operator profiles
The Shopkeeper The Entrepreneur Leases or owns their site May own other businesses Runs a cash flow business. Little family involvement Has family work for free but Will keep some semblance of ppyays for room & board, college financials tuition, car, cell phone, etc. Their next generation family Next generation will typically members continue the not continue the business business Shopkeepers are the hardest to More challenging to work reach and are a challenge to with…tenacious negotiators motivate and typicall y savvy businesspeople Small operator profiles Who’s more important?
The Shopkeeper
The Entrepreneur
They both are important and are the future of our industry…and so, we’re all affected by the growth of small operators DIFFERENTIATION Reality is...
Check your oil?
How do we differen tia te oursell?ves? Bottom line...
Check your oil?
We are over assorted!!! Bottom line...
12’ of oil and auto parts 4’ of pet food Bottom line...
Who knows what this is? Bottom line...
Who knows what this is? Bottom line...
What if we could find a better use for that space? Bottom line...
What if we could find a better use for that space? Bottom line...
What if we could find a better use for that space?
Salsa Sale Bottom line...
What if we could find a better use for that space?
It’s BBQ TIME! Bottom line... We can replace slow moving items with products that tie in with what we sell –Ice, beer, and soda: pop up and traditional coolers –Hot dogs and hot dog buns: single use grills
– Gasoline:Check your single oil? use and traditional gas cans – Bottled water: filtered water sold in refillable containers – All kinds of cold beverages: fresh popcorn We can sell smaller, “auto‐friendly” sized products – Diapers & wipes – Band‐Aids – Duct tape – Fact is, there are hundreds of product ideas…we just need fresh eyes to help us… Bottom line... Our industry puts up with more crap than any other channel –Credit card fees and mandates –Perception that we make a huge profit selling motor fuels –Customers driving to hell and back to save 40¢ on a fill up –RegulationCheck your after oil? regulation including new FDA control of tobacco Despite a rough year, we’re bound to sell more stuff as consumers become more time starved and looking for a “reward” –We need to understand our customers better –We are squeezed by space –We need to know our competition better – We need fresh eyes OPPORTUNITIESOPPORTUNITIES NOWNOWHERE HERE
http://www.nacsonline.com/NACS/RESOURCES/RESEARCH/Pages/NACSCoca‐ColaRetailingResearchCouncil.aspx Than k you
• Contact IIfnfo
Michael Davis VP Member Services [email protected]
+1 703 518 4246 888 843 5705