the association for convenience & fuel retailing the state of the industry convenience &...
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The Association for Convenience & Fuel Retailing
The State of the IndustryConvenience & Fuel Retailing in the U.S.
Idaho Petroleum Marketers & Convenience Store Association
2015 Annual Convention
Henry ArmourPresident & CEO
The Association for Convenience & Fuel Retailing
Presentation Overview
• What happening inside our house?!– Sales, gross profit and category trends
• Is Our Growth Really Going To Come From Foodservice?
− What’s going with QSRs?− What can we learn?
• reFresh – Repositioning our industry’s image − Our image is inhibiting our growth− We’re being targeted with unwarranted and
ineffective regulations and legislation− A 10 year plan to do something about that!
The Association for Convenience & Fuel Retailing
Snapshot 2013 2014 % Change
Store Count 151,282 152,794 1.0%
Employees (millions) 2.2M 2.4M 9.1%
Total Sales (billions) $695.5B $697.5B 0.3%
Inside Sales $204.0B $214.9B 5.3%
Fuel Sales $491.5B $482.6B (1.8)%
Fuel Gallons 242.4B 249.6B 3.0%
Pretax Profit (billions) $7.1B $10.2B 43.9%
Card Fees (billions) $11.2B $11.4B 2.3%
Transactions/day (millions) 163.0M 167.0M 2.5%
Big Picture
Source: Nielsen TDLinx , NACS State of the Industry Survey of 2013 Data & CSX, LLC & U.S. Energy Information Administration
The Association for Convenience & Fuel Retailing
Store Level Sales (same firms)
Per Store/Per Month Jan-Dec 2013 Jan-Dec 2014
Total All Sales $560,531 $560,419 0.0%
Fuel Sales $460,803 $452,683 (1.8)%
Fuel Gallons 133,218 136,255 2.3%
Average Selling Price $3.46 $3.32 (4.0)%
In-Store Sales $130,778 $137,762 5.3%
Foodservice Sales $24,494 $27,198 11.0%
Merchandise Sales $106,884 $111,170 4.0%
Mdse less Cigarettes $64,704 $68,425 5.7%
Cigarettes $42,916 $43,437 1.2%
Source: CSX, LLC
The Association for Convenience & Fuel Retailing
Store Level Gross Profits (same firms)
Per Store/Per Month Jan-Dec 2013 Jan-Dec 2014
Total Gross Profit $69,807 $77,767 11.4%
Fuel $24,914 $30,281 21.5%
Pool Margin 18.70 22.22 18.8%
Margin less CC Fees 13.36 16.88 26.4%
In-Store $43,043 $45,870 6.6%
Foodservice $14,080 $15,645 11.1%
Merchandise $29,308 $30,573 4.3%
Mdse less Cigarettes $23,293 $24,802 6.5%
Cigarettes $6,248 $6,053 (3.1)%
Source: CSX, LLC
The Association for Convenience & Fuel Retailing
Regular Unleaded Margins
Source: CSX, LLC
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 201412.0
14.0
16.0
18.0
20.0
22.0
24.0
12.8
14.8
13.814.2
18.1
13.1
16.3
18.5 18.419.0
22.3
The Association for Convenience & Fuel Retailing
Has Gas Consumption Bottomed Out?
Source: Energy Information Agency
7,500
8,000
8,500
9,000
9,500
10,000
Barr
els
per d
ay (t
hous
ands
)
Weekly through December 19, 2014
The Association for Convenience & Fuel Retailing
Cig-arett
e30.9
%
Pack Bev
15.4
%
Beer7.3%
Center
10.6%
Other
11.4%
OTP5.0%
Sales
Foodservice19.4%
Pack
bev
18.5%
Beer3.9%
Cente
r store12.8%
Other14.0%
OTP4.4%
GP$
Foodservice 33.5%
In-Store Contribution
Cigarettes12.93%
8.8% for stores selling beer14.6% for stores selling beer
Source: CSX, LLC
The Association for Convenience & Fuel Retailing
Core Direct Store Operating Expenses
Per Store/Per Month Jan-Dec 2013 Jan-Dec 2014
Wages & Benefits $21,428 $22,760 6.2%
Card Charges $6,686 $6,838 2.3%
Rent $4,668 $4,971 6.5%
Utilities $2,964 $3,165 6.8%
Repairs & Maintenance $2,854 $3,132 9.7%
Supplies $1,213 $1,295 6.7%
Total DSOE $41,105 $43,349 5.5%
Source: CSX, LLC
The Association for Convenience & Fuel Retailing
NACS Regions
The Association for Convenience & Fuel Retailing
Dec-11
Feb-12
Apr-12
Jun-12
Aug-12
Oct-12
Dec-12
Feb-13
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
Jun-14
Aug-14
Oct-14
Dec-14
8587899193959799
101103105107
5 CENTRAL
3 MIDWEST
4 SOUTH CENTRAL
Regional Trends in Fuel ConsumptionTrailing 36 Mos. through Jan 2015, Dec 2011 = 100
6 WEST
USA
2 SOUTHEAST
Source: EIA Prime Supplier Sales Volumes
1 NORTHEAST
The Association for Convenience & Fuel Retailing
Sales By RegionSame Firms (Jan-Dec 2014 Change YOY)
Per Store/Per Month NE (1) SE (2) MW (3) SC (4) CE (5) WE (6)
Total All Sales (0.2)% 0.2% 0.1% 1.4% (1.2)% (0.3)%
Fuel Sales (2.0)% (0.4)% (1.1)% 0.2% (4.2)% (1.4)%
Fuel Gallons 1.9% 3.8% 2.9% 4.7% (0.2)% 1.5%
Avg. Selling Price (3.9)% (4.1)% (3.8)% (4.3)% (4.0)% (2.9)%
In-Store Sales 3.4% 4.2% 4.2% 6.3% 5.1% 5.5%
Foodservice Sales 9.0% 12.7% 7.1% 8.5% 10.4% 3.4%
Merchandise Sales 1.6% 2.9% 3.9% 5.9% 3.9% 5.5%
Mdse less Cigarettes 3.3% 3.5% 6.4% 7.6% 6.2% 8.7%
Cigarettes (2.4)% 1.7% 1.2% 2.7% 0.5% 1.6%
Source: CSX, LLC
The Association for Convenience & Fuel Retailing
GP$ By RegionSame Firms (Jan-Dec 2014 Change YOY)
Per Store/Per Month NE (1) SE (2) MW (3) SC (4) CE (5) WE (6)
Total Gross Profit 10.1% 10.1% 6.7% 13.5% 8.1% 15.0%
Fuel 23.0% 21.7% 13.2% 26.4% 13.3% 20.6%
Pool Margin 20.6% 17.2% 10.0% 20.7% 13.6% 18.8%
Margin less CC Fees 28.8% 24.5% 14.6% 30.9% 19.3% 24.6%
In-Store 4.4% 3.9% 3.0% 7.2% 6.18% 8.2%
Foodservice 8.1% 13.9% 9.6% 7.0% 8.2% 15.2%
Merchandise 1.8% 1.5% 1.2% 7.0% 5.1% 6.5%
Mdse Cigarettes 2.9% 4.0% 3.6% 10.1% 7.0% 9.0%
Cigarettes (3.3)% (8.5)% (5.2)% (2.5)% (1.9)% (4.1)%
Source: CSX, LLC
The Association for Convenience & Fuel Retailing
Two Stories To Tell
Candy & Fresh Fruit• Why the explosive growth in candy during the
recession. Why?• And why is fresh fruit sales simultaneously
increasing?Coffee• Why did McDonalds capture Starbuck’s
customers during the recession instead of us?
The Association for Convenience & Fuel Retailing
Takeaways• Record profits!– Continuing strong growth in store profitability– Fuel margins were the kicker in 2014
• What’s driving the industry?– Immediate Refreshment– Immediate “Refueling”– The last one standing in Cigs– And an industry under transformation!
• Watch out!– Wage pressure– Outrageous cost of payment continue– Cost control is vital
The Association for Convenience & Fuel Retailing
Is Our Growth Really Going To Be From Foodservice? (2013/2015 Major QSR Sales) Per Store/Per Month Previous Current Change
McDonalds (U.S Same Store) 3.3% (0.2)% (3.5)Pts
McDonalds (U.S. Franchised) 4% 1% (3.0)Pts
Burger King (N. AmericaSame Store Growth)
3.5% (0.9)% (4.4)Pts
Burger King (N. America Total Sales Growth)
3.0% (0.9)% (3.9)Pts
Wendy’s (N. America Same Store Company Owned)
1.6% 1.9% 0.3Pts
Wendy’s (N. America SameStore Franchised)
1.6% 1.7% 0.1Pts
Taco Bell 5.0% 5.5% 0.5 Pts
KFC 5.0% 1.0% (4.0)Pts
Pizza Hut 5.0% 1.5% (3.5)Pts
Source: NACS Research
The Association for Convenience & Fuel Retailing
Burger IPOs in 2014
Habit Burger100 locations in 4 states (HABT) IPO closed Nov 25, 2014.Raised $92.4m at $18/share. Trading at $29.85, 65.8% increase.
Shake Shack63 global locations
(SHAK) Filed for IPO Dec 29, 2014Seeking $100m
$82m in sales, 2013
The Association for Convenience & Fuel Retailing
Food Trucks…Convenient Food!
The Association for Convenience & Fuel Retailing
Learnings From QSR
• QSR Sales Dynamics– Short brand life cycles– Constant menu (brand?) innovation is vital– Be convenient and Fun!
• We have a broad “Competitive Set”– The consumer doesn’t think about “channels”
The Association for Convenience & Fuel Retailing
reFresh(ing) Our Industry’s Image!
The Association for Convenience & Fuel Retailing
We Have to Change the Dialogue!!!
• Purveyors of death• Addictors to gambling• Enablers of drunk driving• Contributors to obesity• Dead end jobs• Dirty stores• Crime ridden facilities
One View of Our Industry
The Association for Convenience & Fuel Retailing
A Contrary View of Our Industry• We create opportunities
– 2.4 million jobs– First jobs, teaching responsibilities– First businesses
• We are responsible retailers– 3X more ID verifications than TSA
• We contribute to our communities– 4X more youth sports teams– $175 billion in taxes– 152,794 stores in every community
• We provide Choice– Healthy options & indulgent delights
• 167 million transactions/day!!!
The Association for Convenience & Fuel Retailing
reFresh!• The Model – Pricing Gouging– 10 year commitment, targeting specific audiences
• Telling our story (or others will)– Industry “story-telling” advocacy– P/R Toolkit to activate and hone our members’ voices– The venues (Zoning, In-Store)– Don’t run from who we are; Emphasize “Choice”
• The targeted “Ears”– “Officials”– Senior editors of mass media
• The “Voices”– NACS– State associations– YOU!
The Association for Convenience & Fuel Retailing
Early Work
The Association for Convenience & Fuel Retailing
Early Work – Telling Our Story!
It was a great event. The Congressman had fun engaging with customers and learning about our business and our industry. For customers to come in and see cameras and the member of Congress, it gives our operation a heightened view within the community.“Lynn Rasmussen, Regional Director - Maverik
Congressman Joe Wilson (SC) Congressman John Barrow (GA)
The Association for Convenience & Fuel Retailing
Early Work – Telling Our Story!
Senator Mike Enzi (WY) Congressman Mike Coffman (CO)
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NACS Contact Information
Hank ArmourPresident & Chief Executive Officer [email protected]