ara newsletter jan 2020

Jan 2020

ARA FlashPage 4

2020FEBRUARY 26

I N F I N I T E E N E R G Y F O R U M

Member Compliance Bonus

Pages 20-21

Non-compliance Policy

Pages 24-26

Merchandising the Strike Zone

Pages 28-30

FDA Tobacco LawPages 32-33

Is your Business in Trouble?Pages 36-38

Antonio Bivins

888.582.3124

Travis Johnston731-441-2169

Careyann Robleski630-917-5700

ABOVEO / Mercury OneContact Person: Rafi Shaik Phone: 678-883-2928

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Salima Lalani

346-666-1704

Shane Haynes205-388-0162

Greg Potthast404-549-0769

Selena Lane980-833-3221

Keurig Dr. PepperJD Hubert

239-994-7233

VPX Sports / Bang

Adam Perry 954-826-3218

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Dear ARA Members, Happy New Year and Welcome to 2020! May this new year turn all your dreams into reality and all of your efforts into great achievements. The new year both inspires with the opportunity of new beginnings as well as counsels through the gift of hindsight to reflect on past challenges. From a group standpoint, in 2020, ARA will embark on a new trajectory that will genuinely personify our mantra: “Working together we grow.”

The new trajectory we’ve laid out comes in the form of new cold vault programs that launch January 1st, 2020. Our CEO and the Marketing Team have finalized negotiations with both existing and new cold vault vendor partners to bring programs that promise to deliver significant financial gains relative to prior years. Members will be presented with the opportunity to capitalize on their cold vault and leverage ARA’s collective strength like never before. As is the case with any agreement, there are terms and commitments that must be met in order to reap the benefits. To that end, we’ve laid out a comprehensive approach as to how Members will be able to meet said requirements. Make sure to read the new Member Participation Bonus article as well as the Compliance Policy & Procedure included in this issue.

The new cold vault programs will leverage the clout of ARA Members via standardized planogram sets. Significant research and analysis were invested by the ARA CEO and Vendor Relations Team to deliver planogram sets that cater to meet everchanging consumer tastes as well as the need for product innovation. Several planogram configurations were developed in order to address the various store configurations of Member stores. It should be noted that prior to launch, the new cold vault planogram sets were test piloted at Board Member-owned locations. Our intent was to identify any procedural issues or challenges and resolve them in a controlled pool of stores with subsequent learnings to be applied at member stores. My sincere thanks to the ARA Board for undertaking this process for the benefit of our Members. The new cold vault program and sets were previewed to ARA Members this past November 17th at the 2020 Programs and COAM Industry Update Meeting held at the Ashiana Banquet Hall. While we had a solid number of Members present at the event, there is still a large portion of the Membership that is yet to attend. To that end, we will continue to host these communication meetings in the weeks ahead. The main objective of these meetings is to present the new cold vault program in its entirety which includes both funding opportunities as well as compliance elements. Stay tuned for meeting dates, locations and times. Please make the time to attend these important meetings.

In prior communications, we’ve alluded to “A New Day” at ARA. Now, you’ll soon learn, “A New Day Has Come!” In 2020, ARA Members, like never before, will be able to maximize the earning potential of the cold vault with standardized planogram sets and will be able to take full advantage of cold equipment placement revenue. There will be funding across all cold vault categories and as an additional incentive, there will be a new member participation bonus where members can earn as much as $1400 annually.

We strongly believe that now is the time for Members to truly leverage ARA’s strength; not as a chain of independent owners, but rather as a collective enterprise of Market Leaders! The secret to our success is now in your hands because execution in 2020 will set the stage for future growth. So let’s work together and raise the bar of the entire Membership.

ARA UPCOMING EVENTSARA FLASH

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ARA SIGNAGE GUIDELINES

QUICK THOUGHTS FROM THE CEO

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Everyone would agree that the Cold Vault is the heartbeat of a convenience store. Within those glass doors are many things to many people. We often forget the various roles of our cold beverages. U.S. convenience stores are the destination of choice for 165 million consumers who frequent their favorite location each day, and a whopping 83% of the items bought at a convenience store are consumed within the first hour of purchase. Let’s think about what we are offering on a daily basis…

This prime real estate within your four walls allows ARA to sell some of our partners most profitable packages. The end result is that both ARA Members and our suppliers make

excellent margin from our assortment that is offered cold. However, it is critical to always remember that our cold space is extremely limited, so we need to make wise decisions on how to use this space annually. This means a focus on profitable, impulse items with fast turns, and a selection which ultimately offers value for consumers.

Consumers love to try new things and a single consumption package is the best way to experiment. It might be a new flavor, a new category, or even a new package. But we need to remember that we offer a small dose of excitement for consumers wanting a little something different. A great quote from Charles M. Schulz was: “What’s the good of living if you don’t try a few things?”

Why is this important? ARA constantly works with our supplier partners to ensure that we are capitalizing on the newest innovation that makes sense for our each of our respective consumers. For instance, does it fill a need? That need might range from a shot of caffeinated energy… a healthy beverage like water or juice… a zero calorie assist with a personal diet…replenishing fluids after a hard workout… to simply a favorite taste to bring pleasure to a day. We also need to stay focused on the wide variety of consumers who enter our stores in search of liquid refreshment.

Our cold vaults include carbonated soft drinks, energy drinks, isotonic sports drinks, teas, ready-to-drink coffees, juices, waters, protein drinks and dairy items. Each type of drink plays a vital role for consumers, so each must be managed closely. For 2020, we have moved to a pre-negotiated planogram for each ARA store size, regardless of how many cold vault doors you might have. These decisions bring extremely beneficial financial resources to ARA members, so to waste this space with slow-moving, less-profitable items simply does not make sense. We will constantly be monitoring the sales and profitability performance by SKU, to ensure that we have the best line-up.

ARA faces strong and impressive convenience channel competitors in Georgia, so it is imperative that we provide true value to our consumers. By offering promotional and EDLP price values, along with effective variety, we are able to differentiate ourselves. Our various promotional platforms provide special pricing and our new consistent POS process communicates in a transparent way. Today’s consumer insists on this type of execution.

PROFITABILITY

INNOVATION

CATEGORIES

VALUE & PRICE PERCEPTION

Hopefully, every member has placed conventional spanners and digital boards for promotional use. If not, these decisions need to be carefully considered, as it is critical to communicate with each person that drives by your store, or stops for fuel, or enters the store.

Our goal moving forward is to offer better choices for our consumers, while presenting a clean cold vault. By that, we want to limit signage and clutter on cold vault doors. We will be using a consistent circular static cling for each vendor’s brands. We will also request that each brand use channel strips on each and every shelf of the vault. Finally, we ask that each shelf be priced with dual-tie pricing clips. Starting with our individual Front End Merchandiser (FEM) coolers, we want to start utilizing segmentation, meaning that we want to ensure the best brand sets for the respective store. Whether an Urban location or a Suburban location, we are asking our supplier partners to use the right brands and the correct POS consumer messaging. Finally, we expect each cold vault to have planograms posted in the backroom, to enable easy and consistent restocking.

Change presents opportunity… and we want to leverage that opportunity with correct decisions! Three trends to watch in non-alcoholic beverages:

EXECUTION

TRENDS

ENERGY EXCITEMENT

WATER SUB-CATEGORIES

ISOTONIC / SPORTS CATEGORY

One of our new partners, VPX Sports (which sells BANG), rocked the Energy market with triple-digit growth. Monster Energy has fought back with Reign, as both are pursuing the “fitness” energy category. Red Bull continues to plug along with excellent innovation, execution and growth. Coca-Cola adds a new twist in 2020 with Coca-Cola Energy. We have also added new entries to this category with Adrenaline Shoc and Xyience (both from Keurig Dr Pepper). Pepsi will be offering up new ideas with both Game Fuel and Rockstar. This category is expected to perform at double-digit growth in 2020.

We now view this category in 4 groupings: Value, Base, Premium, and Enhanced. DejaBlue enters our vaults from KDP as our low-priced Value water offering. Dasani and Aquafina hold down the Base Water business. Premium Water offers many new choices (led by Smartwater, Life Water, CORE, Evian, Body Armor Water, VOSS, and Essentia) and we hope to capitalize on this consumer shift to these items with improved price points and margins. Finally, Enhanced includes the hot new category of sparkling waters (i.e. Bubly and AHA), as well as favorites such as Vitaminwater, Propel and Hydro.

Keep an eye on this group, as it is currently the fastest growing category in Georgia Convenience at +18%. The newest player, Body Armor, is growing at impressive growth rates. Both Gatorade and Powerade are both introducing new innovation in 2020, which will bring added interest to the line-up. Our new planogram is now set at 50% for Gatorade and 50% for Powerade & Body Armor combined.


QUICK THOUGHTS ....CONTINUED

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RESETS

ARA is now in the process of resetting the cold vaults and visi-coolers in all stores during the First Quarter, 2020.

Please work with our supplier partners as they complete these resets. Amin Merchant, our new ARA

Compliance Manager, will be leading this effort. Please remember that each store will earn $200 for removing

non-planogrammed items prior to the reset. Orders on these non-planogrammed items should be

discontinued immediately. Make sure to check out the non-planogrammed segment included in this issue of the

Newsletter.

Thanks to each of you for the new focus and attention to our prime real estate: our ARA Cold Vaults. Together,

we will ensure that these doors and shelves generate valuable profits for ARA Members in 2020 and beyond!

Steve

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QUICK THOUGHTS ....CONTINUED

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2020 Contracts & COAM Industry Update Meeting Recap Recap and Highlights of the Day’s Proceedings

ARA Members gathered on Sunday, November 17th at the Ashiana Banquet Hall to glean information on the 2020

Contracts as well as an Industry Update on the COAM Segment from guest speaker Michael Parham, VP of COAM,

Georgia Lottery Corp. The overarching theme of the event was “A New Day has Come” in reference to the 2020

initiatives being launched and presented to Members.

Members were treated to a scrumptious brunch served by Ashiana and were welcomed by ARA Vice Chairman, Firoz

Narsidani. The COAM Industry Update as delivered by Mr. Parham was both concise and insightful. Members

learned first-hand the progress that has been made in terms of compliance, regulation, enforcement and most

importantly the financial impact that the segment contributes towards Education. As a memento of the event, Mr.

Parham was presented with a token of appreciation by ARA Chairman Karim Thobhani and Vice Chairman Firoz

Narsidani.

The Chairman’s address was delivered by ARA Chairman Karim Thobhani, who articulated in great detail the

significantly enhanced financial components of the 2020 programs. His message centered on the premise that ARA

Members potentially stand to reap great dividends by participating, executing and complying with the new

programs. He also illustrated the value and impact that Members can come to bear when operating in a unified show

of force.

Chairman Thobhani was followed by ARA CEO, Steve McCown, who took to the stage to present the 2020 contracts

as well as the corresponding program elements, requirements and compliance vehicles that will be in place for the

next year. Mr. McCown presented a very clear picture of the opportunities, challenges and rewards that lie ahead.

The Q&A session followed Mr. McCown’s remarks, and needless to say, there was a plethora of questions centered

on the new programs (Make sure to read the article dealing with some of the questions received). During the final

segment of the event, Members were asked to recollect key items from the presentations and correct answers were

rewarded with various name brand gift cards. Several lucky Members won flat screen TV’s and additional gift cards

during the prize drawing for meeting attendees.

The closing remarks and vote of thanks were delivered by ARA Treasurer, Mr. Alnoor Kassam. And with that, the event

came to a close. Mr. Kassam reminded members of the upcoming ARA EXPO on February 26th and the 25th Annual

General Body Meeting and Gala on Saturday, April 11th the Hyatt Regency Atlanta.

Why is ARA implementing planograms in 2020?

Weren’t ARA Members already operating as a chain in prior years?

Why are vendor partners willing to increase cold vault funding in 2020?

There is a significant financial advantage to operating as a unified chain of nearly 1,000 stores as opposed to a large group of independent store operators.

To a certain degree, yes… Members were operating in a semi-unified fashion. Compliance and execution were inconsistent. For 2020, we’ve negotiated programs that promise to deliver significant financial benefits if fully executed.

It’s simple, our vendor partners are willing to pay if they KNOW they will get what we promise. The highlights of the 2020 cold vault program include the 4 C’s:

What are the headlines of the 2020 Cold Vault Program?

• ARA Members commit to operate as a Chain

• ARA Members deliver Consistency across all stores

• ARA Members commit to a Cold Vault Planogram Set

• The promise of improved Member Compliance

• Consistent & Unified 2020 Cold Vault Planogram

o Enables MUCH MORE funding for Members in compliance!

• A New Payment Plan to Members

o Quarterly rebates & equipment placements

• New Vendor Partners

o Keurig Dr Pepper & KPX Sports (BANG)

• New Policies

o Will improve compliance and prevent programs from collapsing

• Placement Priority

o A New 2020 “Priority Order” for Cold & Warm Equipment

• Discontinued Partnerships

o Refer to the Non-Planogrammed Products page

• Why were some brands excluded from the sets?

o Some brands did not want to work with us as they did not share our vision.

o Their Quote: “We don’t need ARA to negotiate with Members, we can go to Member stores and get access for free”

o Result: We will only work with brand partners who will negotiate in good faith and on behalf of ALL Members

• Discontinued “Member Choice” shelves

o Replaced with revenue driving placements

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QUESTIONS AND CONCERNS MEMBERS HAVE ASKED ABOUT THE ARA 2020 COLD VAULT RESET PROGRAM

What NEW Policies were introduced for 2020?

• The 2020 Compliance Bonus Program*

• The 2020 Member Non-Compliance Policy and Process*

• The 2020 Vendor Non-Compliance Policy and Process*

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Authorized cold equipment funding goes directly to ARA Members on a quarterly basis. Funding will vary per FLM cooler, per store, per year. See the placement priority article in this issue of the Newsletter.

We tried to include as much variety in the cold vaults sets as possible with the vendor partners that would work with us. If there is a specific brand you’d like to see included in the set, call the ARA office and let us know. We’ll work with the vendor on including them in the cold vault as appropriate. Please review the Non-Planogrammed product sheet included in this Newsletter for more details. And as always, call the ARA Office with any questions.

*Refer to the articles in this issue

What is the benefit of placing Cold Equipment in my store and what is the placement order?

Will I have the ability to carry items not included in the planogram?

What if a particular item sells well at my store?

In the next few days, the ARA Compliance Manager or a member of the MSR Team will reach out with a reset plan for your location. They will also make recommendations for cold equipment placements. Once the reset plan is agreed to, the reset is scheduled and equipment is ordered. In the interim, please review the Non-Planogrammed Item sheet and discontinue ordering these items as they will no longer be authorized to be in the cold vault.

What are the next steps?

You are the final piece to the puzzle…

QUESTIONS ....CONTINUED

2020 MEMBER COMPLIANCE BONUS PROGRAM Overview, guidelines and qualifiers

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In 2020, ARA Members will have the opportunity to earn up to $1,400 in additional annual bonus revenue by participating in and executing vendor partner agreements. The total payout will vary based on the level of participation and compliance with each vendor partner’s program elements. Compliance Bonus Payments will be made on a quarterly basis and are incremental to quarterly patronage dividends. Due to the variety of store formats and participation due to distribution areas, payout tiers were established.

Participation & Compliance in 10 Partner Programs $1,400.00

Participation & Compliance in 9 Partner Programs $1,000.00

Participation & Compliance in 8 Partner Programs $800.00

PARTICIPATION BONUS PAYOUT LEVELS (Per Year)

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• Coca-Cola Bottling Company UNITED (CCBCU)

• Pepsi Beverages Company (PBG)

• Buffalo Rock Company (BRC)

• Keurig Dr. Pepper

• Monster Energy (Distributed by CCBCU)

• Red Bull (Distributed Matador Distributors)

• VPX Sports and Bang Energy

• Gatorade (Distributed by PBG or BRC)

• Frito Lay (DSD or Online)

• Preferred Grocery Partner (Core-Mark, Eby-Brown or HT Hackney)

• Preferred Coffee Partner (Community Coffee, Royal Cup or Metro Coffee)

All payouts are contingent on Member participation and compliance with

program elements for each vendor partner. For details on each program,

consult with the ARA Compliance Manager, your MSR or online at:

Make sure to max out your Member Compliance Bonus in 2020!

https://ara.membersgomobile.com/member/index.html

PREFERRED VENDOR PARTNERS

2020 MEMBER COMPLIANCE ....CONTINUED

The new year marks a significant turning point for ARA as the new cold vault programs carry the promise of

significantly increased profitability opportunities for Members. With the increased funding from existing and new

vendor partners comes the requirement of Member compliance. The policies and procedures outlined below will

be in effect for 2020. The policies listed are not meant to be punitive in any way as they were drafted to clearly

outline compliance and the steps to address non-compliance.

1. Failure to follow the ARA agreements with preferred vendor partners.

2. Failure to follow the ARA established annual Cold Vault Planogram, based on your respective Cold Vault

size (# doors / # of shelves).

3. Failure to follow the ARA Promo Platforms by month:

• Conventional Spanner, Digital Spanner, & Window Poster(posted within 3 business days of

the promotion)

• Promotional POS on Cold Vault Door (linked to promo nets provided by vendors) – (standardized

and maintained)

• Refusal to offer SRP or “2 for” price offers when promos provided by Vendor Partners

4. Failure to follow the cold and warm Equipment Placement priority order

• (see the article in this Newsletter)

5. Out-Sourcing product from any location other than the preferred vendor.

1. If member is Non-Compliant, the ARA Member is sent an initial letter, specifically stating the issue of

concern.

• The ARA Member must correct issue within 5 business days, then provide a photo of the

correction to the ARA Compliance Manager.

• (If the Non-Compliance is due to Vendor negligence, the ARA Member is responsible for

responding to ARA to explain why/how it happened and must show with a photo that the matter

has been corrected or resolved.)

2. If correction does not occur, the ARA Member is sent a 2nd Letter.

• The ARA Member has 4 additional business days to resolve the matter by correcting the specific

issue and sending a photo of the correction to the ARA Compliance Manager.

• If the non-compliance issue is still not corrected after the 4 days, the ARA Member will be fined

$500 (deducted by ARA)

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2020 NON-COMPLIANCE POLICY AND PROCESS Overview of the new compliance policies in effect for 2020

NON-COMPLIANCE DEFINITION (MEMBER)

2020 NON-COMPLIANCE POLICY AND PROCESS (MEMBER)

3. If correction has not occurred, the ARA Member is sent a 3rd Letter, following the fine.

• The ARA Member has 3 additional business days to resolve the matter by correcting the specific

issue and sending a photo of the correction to the ARA Compliance Manager.

If the non-compliance issue is still not corrected after the 3 days, the ARA Member will lose a

Quarterly ARA Patronage Payment.

4. FINAL RESOLUTION

• The ARA Member will be asked to meet with the Executive Committee and CEO to explain why

non-compliance has not occurred.

• If the ARA Member refuses to achieve compliance, Member will be terminated from ARA.

5. TERMINATION

• The ARA Member will be terminated from ARA for a minimum of 3 months.

• At the end of a full 3 months, the individual may apply for reinstatement, without guarantees of

reinstatement.

• The individual must demonstrate FULL compliance on ALL elements for 3 months before any

decision of reinstatement by the Board of Directors

• No ARA Quarterly Patronage payments will be made during these 6 months (or more) of

termination.

•

1. Blatant competitive POS or Pricing removal by any member of a Vendor’s organization.

2. Failure to remove the pricing on any promoted package (once a promotion ends)…vendor has 5 business

days to remove this pricing (once Member is no longer receiving the discount).

3. Intentional expansion of Cold Vault space/facings which does not follow the 2020 planogram for this

specific store size.

4. Changing space or priority placement against our agreed upon ARA planogram: 1) cold vault 2) cold

equipment, 3) warm equipment, 4) POS - indoor or outdoor.

5. Missing 3 consecutive deliveries to the same store… if orders have been submitted by ARA.

1. A Written Warning to the Vendor… with 5 business days to correct the non-compliant situation in

question. (a photo will be provided to the ARA Compliance Manager)

2. A Second Written Warning to the Vendor, and if not corrected within 4 business days, a $500 penalty & a

note to the Vendor Senior Management (a photo will be provided to the ARA Compliance Manager, upon

resolution)

NON-COMPLIANCE DEFINITION (VENDOR)

2020 NON-COMPLIANCE POLICY AND PROCESS (VENDOR)

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NON-COMPLIANCE ....CONTINUED

3. A Third Warning Letter, along with the Vendor’s position being flipped on a category in this respective

ARA store… 3 business days will be provided to resolve the situation. (a photo will be provided to the

ARA Compliance Manager)

4. A request for a Top-to-Top between the Vendor & ARA, and a reduction of cold vault space until there is

Senior Management commitment & intervention… and until the non-compliance situation has been

resolved (along with a photo illustrating the resolution).

1. Addressing Non-Compliance with both Vendors & Members

• while allowing plenty of time for correction

2. Provide incremental financial rewards for Compliance

Why: The Purpose Is To Protect Lucrative Cma Agreements That Benefit All Members!

The Goal: Simply To Increase Dollars Available To Pay Out To Members.

The Risk: Not Honoring The Agreements Promised To Our Vendor Partners.

The Need: Strong Growth Years For Each Member & Vendor Partner – Providing Proof That They

Made The Correct Decision!

KEY TAKEAWAYS

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NON-COMPLIANCE ....CONTINUED

A typical convenience store that sells gas may attract almost 1,500

people to its lot per day, according to Coca-Cola research. Only 71%

of those would-be shoppers will go inside the store, and

approximately 40% enter the store, but don’t buy any merchandise.

That means every day about 1,000 convenience store visitors leave

without purchasing an item other than fuel. These numbers can

add up to a sizable opportunity. The Atlanta Retailers Association

(ARA) is committed to helping Members realize this opportunity by

reaching would-be shoppers with opportunities for purchase to

convert them into buyers.

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MERCHANDISING THE STRIKE ZONE HELPS CONVERT SHOPPERS INTO BUYERS Leverage strategic points of inspiration to boost sales

THE OPPORTUNITY The same research also shows that convenience store success requires two types of conversions: lot-to-visit,

which is the percentage of people who arrive on the lot and go inside the store; and visit-to-purchase, those who

go inside the store and make a purchase. By improving lot-to-visit conversion by just one percentage point, a

single convenience store could see a significant boost in incremental total sales, as well as a bump for the Non-

Alcoholic Ready-to-Drink (NARTD) category.

Of the 1,000 visitors who go inside the convenience store, only about 37% purchase NARTD beverages, which

equates to approximately 370 potential buyers per outlet every day. Coke’s research highlights not only

convenience store transactions, but also shopper traffic, revealing that 26% of shoppers who enter convenience

store visit cold vault non-alcoholic beverages first, followed by salty snacks (15%), confections (12%) and

dispensed non-alcoholic beverages (10%).

“When we think of bundling opportunities, shopper behavior suggests that the in-store ‘real estate’ that’s

between first destination categories and the checkout gives us multiple opportunities to drive bigger baskets if

UNDERSTANDING TRAFFIC PATTERNS

we can connect the dots for the shopper,” says Scott Tillman, director, retail channel strategy &

commercialization for Coca-Cola. Put another way, of every 100 people who visit convenience store beverage

categories, what proportion stops to actually shop and engage? Of those who stop and engage, what proportion

actually purchases?

While cold vault beverages draw higher traffic, they get

a lower proportion of visitors to shop and buy. However,

the high traffic areas between the vault and the

register (strike zone) – as well as the vault itself – are

fertile ground for priming incremental purchases with

NARTD beverages. “This suggests that the vault would

benefit most from tactics that increase shopability

(consistent layout & planograms) and engagement,”

says Tillman.

A common element in most major retail outlets is the

placement of cold equipment at the register or checkout

area or strike zone. The objective of these placements is

to create an incremental purchase opportunity. While

some customers will purchase an item other than fuel,

all customers will approach the register area.

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COLD EQUIPMENT PLACEMENT AT ARA STORES

In 2020, The Atlanta Retailers Association Marketing team

is launching an aggressive campaign to place Front End

Merchandiser (FEM) Coolers in Member stores in high traffic areas. Any equipment placed needs to follow the

priority placement guidance in order to qualify for payment. Members can earn up to $4,000 per year by placing

FEM cold equipment. Placement fees are in addition to the profitability of products sold through. Call the ARA

Compliance Manager, your MSR or the ARA office for more details on this program.

STRIKE ZONE ....CONTINUED

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The FEM cold equipment placement priorities for ARA Members in 2020 are:

STRIKE ZONE ....CONTINUED

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TOBACCO 21 LAW ....CONTINUED

IS YOUR BUSINESS ....CONTINUED

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IS YOUR BUSINESS ....CONTINUED

ara newsletter jan 2020

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