Coffee in Convenience Agenda:

Coffee in Convenience Overview

Industry Leaders

Vendor Partnerships: View From a Retailer Perspective C-STORE CHANNEL: OVERVIEW C-store Retailers – Focusing on Inside Sales

2017 14.9% increase in fuel sales due to increased gallons and retails

Total Sales (in Billions)

316.8  Total Industry Sales 482.6 349 364.1 Fuel Increased 9.3% YOY after several years of 233 decline 213.4 225.8 237 Inside  Retailers focus heavily on inside sales for growth with 1.7 % increase Total 696.1 574.8 549.9 601.1

2014 2015 2016 2017

Source: 2017 State of the Industry/SOI, NACS/CSX Foodservice – The Most Profitable Inside C-store Category

2017 Inside Sales $ 2017 Inside GP $

Beer 6% Beer 6% Tobacco Other 19% Tobacco 17% 34% Other 23%

Packaged Beverage Foodservice 16% 34% Foodservice Packaged 23% Beverage 20%

Source: 2017 State of the Industry/SOI, NACS/CSX Convenience Innovation

1. Varied levels of indoor and outdoor seating 2. Drive Through 3. Integrated Barista Programs 4. Millennial based customization focus via ordering kiosks and beverage equipment 5. Embracement of technology with frictionless checkout, self checkout, mobile payment. 6. Improved “smart” loyalty programs 7. Use of digital and social medias (Waze; Place IQ; Facebook) C-STORE CHANNEL: BEVERAGES OVERVIEW Beverages Represent 26% of Total Foodservice Sales

Hot coffee being the key dispensed beverage driver Sales of top beverage types

Traditional hot 10% coffee 3% Dispensed CSDs 26% 7% Beverages vs. Specialty hot coffee 40% food sales Total Frozen non-coffee 14% $11,132MM beverages RSE Iced/frozen coffee Growth Rate Hot beverages growth (2014-16 CAGR): All other • 1.5% $ and 3.9% volume 26%

Cold beverages growth (2014-16 CAGR): • 0.9% $ and 3.7% volume

Behavior and preferences vary strongly by region. Tailoring beverage offerings to your core customer base can help to ensure you are meeting your customer’s needs and expectations.

Source: Technomic AFH Beverage Study, 2017 and Technomic Convenience Store Study, 2017 Foodservice Beverage Growth

Expected to be consistent in the coming years

Historic and Forecast RSE ($B)

$13,264 $11,915 $11,482

$7,045 $6,092 $6,332

$4,174 $4,280 $4,068

$1,612 $1,216 $1,303

2016 2017(f) 2020(f)

Frozen beverage Cold beverage Hot beverage Total

Source: Technomic, Inc. C-store Beverage Study Frozen Beverages – Smallest Category

Projected to achieve the fastest rate of dollar growth

Foodservice Beverage Outlook Compound annual growth rate 2016-2020(f)

7.3%

3.7% 3.7%

2.5%

2016-2020(f) CAGR

Cold beverage Hot beverage Frozen beverage Total

Source: Technomic, Inc. C-store Beverage Study Consumers Would Like to See

WHAT DO CONSUMERS WANT TO SEE MORE OF AT C-STORES?

Smoothies 25% Lemon/limeades 22% Iced tea 20% Iced coffee 20% Juice / juice drinks 19% Regular soda 18% Cold brew coffee 18% Flavored iced tea 17% Specialty coffee 17% Frozen coffee 16% Flavored waters 16%

Source: Datassential Growing/Declining Beverages Omnibus C-store Consumers Purchase Beverages Frequently

Across all dayparts, but peak in the afternoon

PURCHASE FREQUENCY 80% 71% 67% 61% Top 3 Beverage 60% 56% 49% 51% Occasions 1. PM Snack 40% 2. Lunch 3. Breakfast 20%

0% BREAKFAST AM SNACK LUNCH PM SNACK DINNER LN SNACK

Source: Technomic 2017 C-Store Beverage Multi Report; Base: 2,500 consumers ages 16+ Q: How often do you purchase beverages from convenience stores for the following? Results shown for once a month+ HOT COFFEE: MARKET OVERVIEW Specialty Coffee Will Drive Future Growth

Hot Beverage Category

Total hot beverages 7.0% By beverage category 5 year CAGR Specialty coffee 5 Year CAGR 4.4% 2016-2021 (FC) 2016-2021 FC

5.6% Hot tea 4.8% 3.0%

3.5% Hot cocoa 1.5% 1.6%

3.5% Regular coffee Dollar growth Volume growth 1.0%

Dollar Growth Volume Growth Techonomic Away from Home Study, June 2017 Hot Coffee Market Size by Platform

Hot Coffee Category* Market Size (Mfr. Ship. $ MUSD)

$9,656 $10,000

$7,570 $8,000 $5,295 $6,000 $4,460 $4,361

$4,000 $3,110

$2,000

$0 Drip Coffee Specialty Coffee Total Hot Coffee

2016 Est. 2021

Hot Coffee category is projected to grow by more than 25% by 2021

*Hot Coffee Category includes hot drip coffee and specialty coffee beverages

Techonomic Away from Home Study, June 2017 HOT COFFEE: CATEGORY OVERVIEW AFH BREWED COFFEE: LAST CUP

What do they add? Where do they get it? (top 10)

Coffee shop 20% 66% 44% Donut shop 12% 25% QSR 11% Work 9% Drank it black Sweetener Creamer C-store 9% Regular sugar 56% Flavored liquid 43% Midscale restaurant 4% Splenda / sucralose 16% Half & half 26% Bakery Café 2% Sweet n Low/ saccharin 7% Milk 19% Cafeteria Raw sugar 6% Unflavored liquid 14% 2% Equal / Nutrasweet 5% Unflavored powder 9% Supermarket deli 2% Stevia 5% Flavored powder 5% Casual restaurant 1% Brown sugar 4% Real dairy cream 3%

What type of roast? Was it flavored? How many cups? What restaurant What c-store chains? 1% chains? (top 10) (top 10) 7% Not sure Not sure Starbucks 20% 7-Eleven 16% 12% Light roast Dunkin Donuts 19% Wawa 9% McDonald's 16% Circle K 9% 77% Regular 1.5 Burger King 3% Speedway 8% Medium coffee 60% 5 guys 3% Casey's General Store 5% roast With food? Applebee's 2% Sheetz 5% Panera 2% Cumberland Farms 4% 33% Denny's 2% BP 3% Flavored Had it with 20% Dark roast 21% food IHOP 1% QuikTrip 3% coffee Arby's 1% AM-PM 2% Freshness and flavor are crucial attributes for a cup of brewed coffee. Consistency, strength, and aroma are also factors that would likely cause a consumer to go elsewhere for coffee if they were left unsatisfied.

AWAY FROM HOME BREWED COFFEE ATTRIBUTE IMPORTANCE top 2 box; 10-pt. scale; n=1308

Good taste / flavor 68% Fresh 64% Always consistent 51% Good strength 48% Good aroma 44% Availability of condiments 39% Piping hot 38% Friendly / helpful staff 35% Brand that you like 31% Attractive color 29% Roasts, specific countries of 24% Selection of different flavors and roasts origin, and location ambiance Ambiance 19% are less important as stand alone attributes. Yet, these attributes Beans are from a specific area 16% could make a positive impact on consumers when paired with Prepared by a barista 15% the essential attributes.

Q: Please rate the importance of each of the following when having REGULAR HOT COFFEE AWAY FROM HOME (at restaurants, cafeterias, convenience stores, etc.). BREWED COFFEE

DEMOGRAPHICS indexed against total CONSUMPTION BEHAVIOR

GENDER REGION DAILY BEVERAGE INCIDENCE BY DAYPART

27% 26% 97 West: 93 N. East: 114 10% Midwest: 101 5% 4% 3% 4% 103 South: 97 Early Breakfast Mid- Lunch Afternoon Dinner Late Morning Morning Night

AGE DAILY BEVERAGE INCIDENCE: TRENDED

130 106 44% 45% 46% 46% 46% 46% 70 43

Gen Z Millennial Gen X Boomer + 2012 2013 2014 2015 2016 2017

ETHNICITY HH INCOME SOURCING BY DAYPART

White 112 At Home AFH 94% Under $50K 93 89% 85% 89% African American 63 77% 73% 75%

Hispanic 81 $50K to under $100K 104 23% 27% 25% 11% 15% Asian 80 6% 11% Over $100K 111 Early Breakfast Mid- Lunch Afternoon Dinner Late Other 87 Morning Morning Night AFH SPECIALTY COFFEE: LAST CUP

What do they add? Toppings Where do they get it? (top 10) Whip. Cream 36% Coffee shop 48% Drizzle 19% Creamer 40% Donut shop 11% Spices 12% QSR 6% Crunchy topping 9% C-store 5% Sweetener 31% Extra espresso 8% Bakery Café 4% Extra foam 7% Dessert shop 3% Flavored syrup 16% No foam 7% Work 2% Marshmallows 7% Midscale restaurant 2% Extra hot 6% None 35% Fast casual 2% Latte art 2% Food truck 2% None 29%

What type? Was it flavored? How many cups? What restaurant What c-store chains? chains? (top 10) (top 10) Cappuccino 28% 3% Not sure Starbucks 40% 7-Eleven 19% Latte 25% Regular Dunkin Donuts 10% Speedway 13% 39% Café Mocha 15% coffee McDonald's 6% Circle K 10% Macchiato 9% 1.5 Burger King 3% Shell 7% Americano 6% With food? Applebee's 3% Chevron / Extra Mile 4% Arby's 3% Kwik Trip 4% Shot of espresso 5% Flavored 58% Bob Evans 3% Wawa 4% Café au Lait 4% coffee 36% Panera 1% CITGO 3% Had it with Other 5% food Caribou 1% Holiday Station 3% Not sure 3% Chick-fil-a 1% Mapco Express 3% Like brewed coffee, freshness is an absolute must in specialty coffee. Lack of consistency, good aroma, and strength could also deter a consumer from specialty coffee at a specific location.

AWAY FROM HOME SPECIALTY COFFEE ATTRIBUTE IMPORTANCE top 2 box; 10-pt. scale; n=1315

Fresh 65% Always consistent 55% Good aroma 51% Good strength 48% Brand of coffee that you like 43% Friendly / helpful staff 43% Availability of condiments 42% Flavors stand up to additives / condiments 41% Piping hot 38% Attractive / appealing color 38%

Beans are from an area known for coffee 32% Nice-to-have attributes like sustainability or country of Ambiance 32% origin are not particularly Prepared by a barista 31% important on their own, but could increase appeal of Sustainably sourced 30% coffee if paired with the essential attributes. Low-fat / low calorie versions 25%

Q: Please rate the importance of each of the following when deciding whether to order / purchase SPECIALTY COFFEE AWAY FROM HOME (at restaurants, cafeterias, convenience stores, etc.). SPECIALTY COFFEE

DEMOGRAPHICS indexed against total CONSUMPTION BEHAVIOR

GENDER REGION DAILY BEVERAGE INCIDENCE BY DAYPART

West: 128 N. East: 105 112 4% 3% 2% 2% Midwest: 78 1% 1% 1% 90 South: 94 Early Breakfast Mid- Lunch Afternoon Dinner Late Morning Morning Night

AGE DAILY BEVERAGE INCIDENCE: TRENDED

158 107 92 13% 11% 11% 11% 12% 11% 53

Gen Z Millennial Gen X Boomer + 2012 2013 2014 2015 2016 2017

ETHNICITY HH INCOME SOURCING BY DAYPART

White 97 At Home AFH Under $50K 79 75% 73% 65% 66% African American 89 52% 61% 57% 48% 43% 35% 39% 34% Hispanic 122 $50K to under $100K 123 25% 27% Asian 129 Over $100K 116 Early Breakfast Mid- Lunch Afternoon Dinner Late Other 79 Morning Morning Night Cold Coffee: Market Overview AFH ICED COFFEE: LAST CUP

What do they add? Where do they get it? (top 10)

40% Coffee shop 34% 32% 30% 28% Donut shop 20% 18% QSR 13% C-store 6% Creamer Milk Sweetener Flavored syrup None Bakery Café 3% Regular sugar 51% Dessert shop 3% Whole milk 50% Splenda / sucralose 15% Food truck 2% Reduced fat milk 33% Raw sugar 12% Cafeteria Brown sugar 8% 2% Fat free / skim milk 12% Sweet n Low / saccharin 5% Work 2% Equal / Nutrasweet 3% Not sure 5% Fast casual 2% Stevia 3%

Was it flavored? How many cups? What restaurant What c-store chains? Not sure chains? (top 10) (top 10) 2%3% Ethnic coffee Starbucks 29% 7-Eleven 17% Dunkin Donuts 23% Circle K 11% 30% Regular coffee McDonald's 12% Speedway 9% 1.4 Applebee's 2% Wawa 6% With food? Burger King 2% Valero 5% Bob Evans 2% Cumberland Farms 4% 65% Flavored coffee Panera 1% Holiday Station 4% 41% Chick-fil-a 1% Shell 4% Had it with food IHOP 1% AM-PM 2% Tim Hortons 1% Exxon 2% ICED COFFEE

DEMOGRAPHICS indexed against total CONSUMPTION BEHAVIOR

GENDER REGION DAILY BEVERAGE INCIDENCE BY DAYPART

5% 116 West: 120 N. East: 132 4% 3% 2% 2% Midwest: 76 2% 1% 86 South: 86 Early Breakfast Mid- Lunch Afternoon Dinner Late Morning Morning Night

AGE DAILY BEVERAGE INCIDENCE: TRENDED 186

102 13% 13% 13% 82 11% 11% 38 9%

Gen Z Millennial Gen X Boomer + 2012 2013 2014 2015 2016 2017

ETHNICITY HH INCOME SOURCING BY DAYPART

White 97 At Home AFH Under $50K 76 80% African American 94 70% 70% 61% 59% 58% 64% 39% 41% 42% Hispanic 121 $50K to under $100K 128 30% 30% 36% 20% Asian 131 Over $100K 115 Early Breakfast Mid- Lunch Afternoon Dinner Late Other 60 Morning Morning Night COLD BREW COFFEE DRINKERS

GENDER ETHNICITY AGES EMPLOYMENT

63% 41% Full-time 47% 30% 22% 18% Part-time 17% 11% 8% 6% 1% Not employed 24% 45% 55% White Black Hispanic Asian Other Gen Z Millennial Gen X Boomers + Stay-at-home parent 13%

HOUSEHOLD INCOME COFFEE ATTITUDE EDUCATION

Full-time student 13% 18% 24% 19% 16% 20% 2% 33% 53% 14% Part-time student 5% Under $25K - $50K - $75K - $100K - $200K+ $25K $49K $74K $99K $200K Expert Have preferences Indifferent Not a student 83%

HAVE BEVERAGE WEEKLY OR MORE REGIONALITY & AREA Have children in 47% household 79% 82% Away from home At home Of those with children…. 55% 53% 53% N. East: 17% 48% 46% 44% 49% 50% 39% 39% 41% 37% West: 22% Have children Midwest: 22% 43% under 6 years old

South: 39% Have children 6 Hot Specialty Iced Cold Frozen Iced tea Hot tea 57% to 12 years old brewed coffee coffee brew coffee coffee 34% 51% 15% Have children 13 Urban Suburban Rural 42% to 17 years old Consumers stick to what they know when it comes to coffee. Given that most people drink coffee every day, it may be difficult for another coffee type to break into such a routine-driven beverage, especially when it is more expensive and unfamiliar.

REASONS FOR NOT TRYING REASONS FOR DECREASING among those drinking among non-users; n=424 COLD BREW CONSUMPTION less; n=60

Prefer other format 45% Prefer other coffee… 32%

Not part of my… 31% More expensive 25% It’s too expensive 15% Doesn't taste as… 18% The price of cold brew may be a key Dislike flavors 14% 46% of all consumers deterrent for lower drink regular coffee Less healthy 17% income households, on a daily basis. This is which as we saw Don't like coffee 13% in contrast to cold show resistance to brew, which only 11% Less available 13% cold brew. It may be It’s hard to find 8% consume on a daily that consumers basis struggle to see the Less natural 7% added value of cold It is too caffeinated 7% brew compared to Flavors are not as… 5% other coffee types. It is less healthy 4% Don't like cold brew 5% Dislike packaging 2% Don't drink cold brew Serving size is too… 2% 5%

Serving size is too… 1% Quality has… 3%

Other 5% Other 3% B3: Which of the following are reasons why you have never tried COLD BREW coffee? Please select all that apply. B10: Why would you say you are drinking LESS COLD BREW coffee now than you were 12 months ago? Please select all that apply. Hot + Cold Coffee Overlap – Gen Z + Millennials

AFH CONSUMPTION FREQUENCY n=873

6% drink iced/cold 6% drink hot coffee, but coffee, but not hot not iced/cold coffee at coffee at least every least every 3 months 3 months 73% drink both iced/cold and hot coffee at least every 3 15% do not drink months iced/cold or hot coffee at least every 3 months

Datassential Proprietary Omnibus Jan 2018 Late Breaking

 From Technomics Fall 2018 Convenience-Store Consumer MarketBrief On trend: LTO’s, Sustainability initiatives 2/3 Agree or strongly agree that c-stores are as capable as restaurants in offering a great cup of coffee Over 50% prefer self serve hot coffee Gen Z’ers are more likely to purchase cold options With millennials, 25% purchase mto cold specialty once/week 20% purchase cold specialty coffee from a self-serve machine Specialty 49% of consumers prefer to be prepared from a push button or digital machine Gen Z- 35% prefer buying from a digital machine that allow for customization THREE INDUSTRY LEADERS:

WAWA, SHEETZ, QUICKCHEK Wawa Wawa Wawa Wawa Wawa Wawa Wawa Sheetz Sheetz Sheetz QuickChek QuickChek

Thank you