The Association for Convenience & Fuel Retailing The State of the Industry Convenience & Fuel Retailing in the U.S. Idaho Petroleum Marketers & Convenience

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


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!


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


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


Store Level Gross Profits (same firms)


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


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


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


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


Core Direct Store Operating Expenses


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


NACS Regions


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


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


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


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?


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


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


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


Food Trucks…Convenient Food!


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”


reFresh(ing) Our Industry’s Image!


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


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!!!


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!


Early Work


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)


Early Work – Telling Our Story!

Senator Mike Enzi (WY) Congressman Mike Coffman (CO)


NACS Contact Information

Hank ArmourPresident & Chief Executive Officer [email protected]

mailto:[email protected]

Documents

The Association for Convenience & Fuel Retailing The State of the Industry Convenience & Fuel Retailing in the U.S. Idaho Petroleum Marketers & Convenience