Top of the Class: CSP`s 25 Biggest C-Store Chains

Top of
the Class:
CSP’s 25
Biggest
C-Store
Chains
What retailers big and small
can learn from the industry giants
By Melissa Vonder Haar || [email protected]
E
xxonMobil, BP, ConocoPhillips,
Chevron, Shell: Wasn’t long ago
that Big Oil dominated not
only the fuel island but also the c-store
side. Yet those who know the convenience
channel have witnessed a major change in
recent years.
“Big oil companies are fleeing the
scene,” explains Gerald Lewis, a veteran
industry consultant who has worked for
a number of prominent c-store chains.
“This has not consolidated the field, but
created a way for the big non-oil companies to become bigger and the smaller
companies to become more sizable by
buying huge chunks of the oil companies’
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properties. That has really contributed to
diversity in the industry.”
It was with this change in mind that
CSP set about compiling a list of the top
25 c-store chains. Guided by CSPedia,
a proprietary CSP database with information on more than 450 convenience
chains, we’ve ranked retailers by store
count, specifically by company-operated
or franchise stores. (Dealer-run sites did
not apply.) While expected names such as
Couche-Tard and The Pantry still appear,
so do regional standouts, including Kum
& Go and Sheetz.
On the surface, rank-and-file operators, who make up the bulk of the nearly
150,000-store convenience industry, might
share little with businesses that top $1
billion in sales annually. As Lewis puts it,
“Because of 7-Eleven’s size, they have the
same kind of logistical advantage WalMart has. Because they have more stores,
they have more ways of making money by
building up a bigger infrastructure to take
cost out of the stores.”
However, not every retailer on the list is
a 7-Eleven. With locations in all 50 states
(as well as Canada and Mexico) and stores
sizes ranging from 500 to more than 5,500
square feet, the top 25 are quite representative of the diversity within this industry.
In that sense, small retailers may have
25
By the Numbers
6,280,813
30,637
2,274
92
People following top 25
Total number of c-stores
Average square footage of
Percentage of top 25 retail-
retailers on Facebook
run by retailers in the
a top 25 store*
ers offering private-label
top 25
products
* Four top 25 retailers did not offer data on
average store sizes.
more in common with the top 25 than
one might think. The operator with five
or 10 locations within a single municipality or county might be ready to expand
from smaller locations to bigger stores, as
Murphy Oil USA is doing, or try to figure
out a way to use Facebook to its advantage,
such as Sheetz.
Operators big and small can certainly
gain something by looking at the strategies
employed by top retailers and studying
what has and hasn’t worked for them. As
Lewis points out, with oil companies heading mostly out of retail, it’s possible now
more than ever for a small operation to
grow in size, scale and buying power.
Sensible Growth
A critical denominator CSP’s 25 biggest
chains share is constant growth: CoucheTard has been growing virtually nonstop
via acquisition since its first store opened.
Chevron’s ExtraMile plans to double its
retail network by 2015, mostly through
a franchised growth strategy. And Susser
Holdings Corp. opened four new bigbox Stripes locations in the first quarter
of 2012, with 11 additional sites under
construction.
And top retailers aren’t growing just
for the sake of padding their portfolio.
According to veteran industry consultant
Dick Meyer, president of Meyer & Associ-
ates, they’re surging judiciously.
“They’re buying assets, not the entity
and its potential associated liabilities,”
he says. “When you stop to be selective
in your buying, that’s when things make
sense.”
Couche-Tard is one such retailer
applying common sense to its acquisition strategies, which Meyer describes as
“almost symphonic in nature.” Common
sense and creativity also played roles in
Couche-Tard’s 2002 purchase of Dairy
Mart.
“I couldn’t understand them buying
the depressing Dairy Mart chain,” says
Meyer. “But what I didn’t know initially
was that Couche-Tard bought Dairy Mart
out of bankruptcy court with the provision that they could study each of the
stores and determine which stores were
worthy of keeping. They only kept the
good ones. This was a favorable gamechanger for our industry.”
Acquisition isn’t the only way to grow.
Several top-25 retailers prefer to avoid
the hassle of renovating existing dirt to
match their brand identity, and simply
build from scratch.
For every retailer such as CoucheTard, whose growth is pumped up primarily from acquisitions, there are Kwik
Trips, Wawas, Kum & Gos and Quik-Trips
who aim to build 10 to 20 ground-ups
annually, expanding into new markets or
reinforcing core strengths.
And some of these ground-ups represent new turfs. RaceTrac, for instance,
recently opened a 6,000-square-foot protoCSP
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the same community, accounting for
“real growth” of 10 to 15 stores per year.
Buy or sell? Acquire or build? When
it comes to growth, the answer might be
“all of the above.” That’s certainly the case
with Kum & Go, which last year sold 22 of
its Iowa sites and considers acquisitions,
new builds or remodels based on what’s
best for each situation.
Cracking the Foodservice Code
QSR Harmony: Retailers such as Hess recognize that they
don’t have to choose between high-margin proprietary
offerings or recognizable brand QSRs. By providing customers
with both options, they up their foodservice appeal.
type. QuikTrip unveiled a 5,700-square-foot
site. Wawa has broken ground in central
Florida on a café-style concept. Stripes
is going bigger. And if there’s a unifying
element to all of these build-from-scratch
companies, it is their shared marquee:
foodservice (CSP—June ’12, p. 50).
There are hardships with the groundup model, including the cost and time
behind identifying and purchasing real
estate, studying the competitive landscape
and demographic of that neighborhood,
and dealing with planning and zoning
boards. Sheetz has said that the company’s
new builds are often determined, or at least
influenced, by the restrictiveness of local
zoning and permitting processes.
Growth doesn’t manifest exclusively
through more stores. There’s also meat
in the truism of growing through
subtraction. QuikTrip may have added
“If you don’t have the
brands people want,
consumers will go
someplace else and often
take their fuel business
with them.”
36 stores in 2011, but it also had no
qualms about shutting down five Springfield, Mo., locations that didn’t mesh
with QT’s metro focus. Both Holiday
Stationstores and The Pantry/Kangaroo
Express have unloaded assets in states
no longer considered core markets.
Wawa actually factors store closings into
its growth strategy: Over the past three
years, the Pennsylvania-based chain has
grown at a rate of 30 to 40 stores per
year, while generally closing 20 to 25
underperformers (often legacy sites) in
While the breadth and depth vary, each of
our biggest 25 sells some kind of prepared
food. This is representative of another
shift in the industry.
“The fundamentals of convenience
retailing used to be enabling customers
to ‘run in when you run out,’ ” explains
Lewis. “Today, the pendulum has swung
dramatically toward foodservice.”
With taxes on cigarettes constantly
increasing and gas prices in flux, retailers
have to make up the margins elsewhere—
such as with a high-quality, low-cost and
convenient foodservice offering. It can
also help retailers not named 7-Eleven or
Circle K to distinguish themselves.
“The regional and local chains that
have done well have succeeded by finding
some niche they can own—that’s usually
in the field of foodservice,” Lewis says,
citing Wawa, Sheetz and QuikTrip for
their outstanding success in building
proprietary foodservice offerings.
Another example of a store making
its reputation through restaurant-quality
fare is Casey’s made-from-scratch pizza.
What began as an experiment in 1984 is
now the sixth-largest pizza chain in the
country.
The shifting focus to foodservice was
made even more apparent by 7-Eleven’s
appointment of restaurant industry veteran Kelly Buckley to vice president of
fresh food innovations.
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25
“I think historically, people that were
in foodservice stayed in foodservice and
people who were in retail stayed in retail.
But the lines are very blurred these days,”
Buckley said shortly after her hiring.
“Everybody’s playing in everybody else’s
area now. I don’t think there are classic
silos in place any longer.”
While Casey’s and 7-Eleven’s successes
may tempt others to try high-margin
proprietary foodservice, Meyer is quick
to warn that it’s not for everyone: “To
have success with foodservice, you need
100% commitment at the top and limited
turnover at the store level, and you need
foodservice to represent a big enough
percentage of your business that it’s not
just a stepchild.”
Like the majority of c-store operators,
several top 25 retailers don’t fit this
description—but that doesn’t mean
they’re excluded from the foodservice
game. “Every chain can’t do proprietary
foodservice,” says Meyer. “But many chains
of various sizes have executed successful
QSR co-existence partnerships.”
Take Pilot Flying J. Rather than invest
in a singular proprietary foodservice
program, the company has partnered
with multiple franchises to offer customers
a variety of QSR options. While it may
not boast the high profit margins of a
company-run program, it does leverage
trusted brand names such as McDonald’s
and Subway to prompt customers to fill up
at Pilot or Flying J locations.
“Look at The Pantry,” Meyer says.
“They have consistently expanded with
their QSR partners as they indicate it
provides another reason for consumers to
shop their store. And, equally important,
they tout that it helps their bottom line.”
Much like the question of opening
new stores vs. closing old stores, most
successful operators recognize fran-
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CSP’s C-Store Chains
(by store count)
1. 7-Eleven Inc. (includes Prima, Alon): 6,300
13. (tie) Pilot Flying J Travel Centers: 600
2. Alimentation Couche-Tard (Mac’s, Circle K):
6,200
13. (tie) QuikTrip Corp. (QT): 600
3. Casey’s General Stores Inc.: 1,687
17. Susser/Stripes: 539
4. The Pantry/Kangaroo Express: 1,618
5. Speedway LLC (Marathon Petroleum Corp.): 1,375
6. Hess Corp.: 1,360
7. BP Products North America (ampm): 1,200
8. Murphy Oil Corp.: 1,129
9. Valero Energy Corp.: 996
10. Sunoco Inc.: 987
11. Suncor Energy Inc. (Petro-Canada): 900
12. Chevron Corp. (ExtraMile): 650
13. (tie) Cumberland Farms/Gulf Oil: 600
chise or proprietary foodservice isn’t
necessarily an either/or situation.
“Hess has done an exceptional job
of developing a foodservice program
based on a combination of proprietary
items and franchise names,” says Lewis.
“They’ve got Dunkin’ Donuts and
Godfather’s Pizza but they’ve also got
“The fundamentals of
convenience retailing
used to be enabling
customers to ‘run in
when you run out.’
Today, the pendulum
has swung dramatically
toward foodservice.”
several proprietary signature offerings, all
presented in a kind of food-court setting.”
Private Business
Foodservice isn’t the only area top retailers are turning to for proprietary offerings. Ninety-two percent of the top 25
chains sell private-label products, not all
of which are food-related. From lighters
to energy drinks and cigarettes to motor
fuel, the sky is the limit when it comes to
16. Wawa Inc.: 594
18. Holiday Stationstores: 469
19. Kum & Go: 436
20. VPS Convenience Store Group: 426
21. Sheetz Inc.: 412
22. Kwik Trip: 410
23. Delek/MAPCO: 383
24. Tesoro Corp.: 380
25. United Refining (Country Fair, Kwik Fill/Red Apple): 375
Source: CSPedia
private label.
“When starting out to develop a new
program, you have to ask yourself: What
are the things you want to be famous
for?” Lewis says.
Cumberland Farms, for example,
is famous for dairy products—and its
private-label offerings reflect that.
“We are showcasing what has made
us special in New England, which is our
farm-based legacy, our focus on bestin-class dairy products,” Cumberland
president Ari Haseotes said a few years
ago, a statement that holds equally true
today. “That includes milk, bread, cream,
ice cream, cheese, yogurt, things that
we’re known for.”
L i ke p ro p r i e t a r y f o o d s e r v i c e
programs, private-label products are
appealing due to their impressively high
profit margins and consumer-friendly
prices. Still, jumping into private label
can be risky. Such products are difficult
to produce, and many of them fail—even
for top retailers such as Wawa, which does
very well with most private labels but
discontinued its ice-cream novelty and
isotonic lines.
And while chains such as Aldi have
Raise the Roof: By building from
the ground up, QuikTrip can create
customized sites such as this
5,700-square-foot “Generation
3” store, which boasts additional
entrances, an expanded foodservice
program and outdoor picnic tables.
They Did What?
e
Can you match th here
t-t
retailer to the ou
innovation?
1. Murphy a. will offer pizza delivery services at up to 50 stores in 2012
2. Sheetz
b. sells private-label beer made by the second-oldest brewer in the U.S.
3. QuikTrip
c. considers customer feedback when designing new stores
4. Casey’s
d. offers customers the option of buying Greyhound tickets at its stores
5. 7-Eleven e. invested $100,000 to appear in a documentary about product placement
6. Kum & Go
f. is testing out GoogleWallet, in which customers pay via smartphone
7. Sunoco
g. debuted an alternative-fuel station featuring natural gas in 2012
8. Kwik Trip
h. made itself a craft-beer destination with its regional growler program
9. ExtraMile
i. launched a 2011 mobile app that lets users check real-time gas prices
10. Hess
j. has free rapid-charge EV station at one site; expansion plan in works
Answers: 1-j, 2-e, 3-c, 4-a, 5-d, 6-b, 7-h, 8-g, 9-f, 10-i
found success selling almost exclusively
private-label discount brands, Meyer
points outs that c-store consumers are
quite different than Aldi’s core market.
“When you go in a convenience
store, people generally want (and
expect) regional or national brands,” he
explains. “When it comes to expanding
private label, it’s not about doing so just
for the sake of getting a cheaper cost
from the supplier. If you don’t have the
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brands people want, consumers will go
someplace else and often take their fuel
business with them.”
It’s a lesson successful private-label
purveyor Kum & Go keeps in mind when
stocking its shelves. Although the chain
offers private-brand products in everything
from wine to batteries, brand names still
constitute 90% of in-store stock.
“You don’t have to cannibalize the
brand names for private label to succeed,”
says Meyer. “You can coexist. You can
keep your private-label existence, but you
need the brands, too.”
For pr iv a te - l a b e l pro du c t s or
expansive foodservice, size can count.
But as the top 25 chains often prove, the
most successful lines of business are often
the ones right in front of you.
Take coffee, a c-store staple, albeit
one whose reputation deservedly was
rather bitter. Today, coffee is the cup
of competition, not just with fellow
convenience compatriots, but also with
the finest of QSRs. Do it well and your
business may, well, smell the coffee.
Case in point? Petro-Canada, whose
customers buy as many as five cups of
coffee a day. Or Chevron’s ExtraMile,
which described its recently signed
partnership with Seattle’s Best Coffee
as the company’s “biggest revolution.”
Or Wawa, which Lewis estimates sells
upwards of 1,000 cups of coffee a day.
Other retailers in the top 25 are
investing heavily in their coffee offer, from
roasters and thermal pots to innovative
marketing campaigns that make coffee
Watch Out, Domino’s:
Casey’s has distinguished
itself with signature fresh
pizzas for almost 30 years.
It is now the sixth-largest
pizza chain in the country.
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their branded loyalty. The Pantry and
Pilot Flying J, for example, are employing
“coffee hosts” to better serve customers,
and QuikTrip and Sheetz offer full-service
coffee bars, complete with baristas.
“McDonald’s upgraded its coffee
offering to prevent customers from leaving
after eating and going to Starbucks for
their coffee fix—and once McDonald’s
does something on a mass scale, it opens
the landscape for everyone,” Lewis says of
the high-end-coffee phenomenon.
But coffee, in a sense, is something
even more important—it’s a driver. It’s
the 16-ounce cup that broadcasts your
name, builds customer loyalty and cuts
through all day-parts.
And coffee underscores an equally
important lesson: maximizing space to
sales.
“Everybody’s playing in everybody else’s area now. I
don’t think there are classic silos in place any longer.”
Tapping the Trend
“Leverage your existing sites and draw as
much traffic as you can to them,” Meyer
suggests. “When Pac-Man first came
out, retailers made millions of dollars
off these machines that didn’t take up a
lot of room. But guess what? That’s why
people came.”
In a modern take on this concept,
7-Eleven has expanded its PayNearMe
program, which essentially turns stores
into Greyhound ticketing offices. The
company is impressed by the results of a
three-month trial run.
Not ready to turn your stores into
ticketing offices or invest in a vintage Pac-
Man game? Not to worry. Something as
simple as a small but timely promotion
can offer a big payoff.
“There are some common-sense
promotions, like when you give away a
bottle of water to get somebody to fill
up a $60 gas tank,” says Meyer. “This is
very cost-effective, and it brings the fuel
customer into the store.”
The point, he says, is to be creative and
embrace a total-store strategy not reliant
on the success of one category or, worse
yet, a single product.
“There’s no magic changes in how
successful c-store chains operate,” Meyer
says, “provided they continue to steer
their companies with the same disciplines
and strategies that earn profits and create
a ‘culture’ for success.”
As such, perhaps the most important
lesson from how our top 25 c-store
retailers operate, or, for that matter, how
successful retailers have always operated,
is that it’s rarely a question of this or
that, but how to make this and that work
for you. n
More and more top retailers are
using social media, such as Facebook and Twitter, to grow their
brands. To check out CSP’s Top 10
“Social” Chains, visit
www.cspnet.com/10SocialChains
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