Oh (Pea)Nuts

With recent news of Cumberland Farms Inc. recalling some of its private label products due to possible peanut contamination, I've been wondering how well the execution of product recalls has gone in c-stores. Has information from manufacturers been timely -- and reached the store level quickly? Have busy employees reacted swiftly to pulling the products -- and how did they deal with temporary holes on the shelf? Has new, safe product arrived swiftly? Are store associates educated enough to talk to customers who are wondering if it's OK to buy a Snickers bar?

Even if all of the recalls have been handled professionally from the headquarters office to the store counter, do customers trust the neighborhood c-store to have safe products on the shelves now -- or are they simply avoiding anything with even a hint of peanut in it -- or worse, the entire brand's product line? What has happened to sales of granola bars, snack crackers, cookies, ice cream, peanut butter and other peanut carrying products?

I've been assuming if a product is on the shelf, it's OK. But considering many retailers have problems simply pulling out-of-code product from the shelf during a normal sales cycle, there is a nagging feeling of "Hope I'm not about to poison my kids" when I do!

-- Barb Grondin Francella

Truck Stop from the Future

SOMEWHERE IN U.S. -- MARCH 16, 2021 -- Joe’s Travel Plaza, located somewhere in the United States, offers motorists a free ultrasonic car wash “If We Don’t Have a Fuel That’s Compatible with Your Car!”

Well, that’s not entirely true. Joe’s Travel Plaza is actually located in the mind of an inspired Wired magazine reader, who submitted his vision of what the truck stop of the future would look like. To see his vision, click here.

You see, each month, Wired proposes a scenario and asks its readers to sketch out their vision of the future. The magazine then uses the best suggestions to create its “Future Found” photo feature.

This month’s future vision depicts Joe’s as a travel plaza in the year 2021, featuring:
•    Unleaded gas for $29.99 per gallon and diesel for $37.99 per gallon;
•    “Uncle Willie’s Kind Green” premium select Bio-D for $13.99; with a “sour mash” blend for $17.99;
•    An E-Coli bacterial blend fuel, sold in kilograms;
•    Ethanol blends from 100 to 151 “proof";
•    Hydrogen for a flat rate of $99.99, including fuel cell inspection;
•    And a “branded” Oscar Mayer methane fuel in various concentrations.

The sign outside this truck stop of the future also promotes new non-prescription Red Bull Overdrive as well as five minutes free charging for electric vehicles. A banner sign near the fuel station warns truckers to be sure their rig is up to code because Western Hemisphere Free Trade enforcers “are watching.”

There is no indication of how other products inside the store have “evolved” over the years, but the image does show a Starbucks “Diner” as part of the travel plaza.

How accurate is this prediction? Tell us your predictions here and we’ll use the best suggestions in our special 40th anniversary issue, coming in July.

The Power of Sex Appeal

Kudos to 7-Eleven for what’s sure to be an eye-catching promotion.

The convenience store chain is now partnering with Sports Illustrated and Alliance, an in-store marketing solutions provider, to offer a peel-and-stick poster of racing superstar Danica Patrick with the purchase of the 2009 Sports Illustrated Swimsuit Edition.

Did I mention, the IndyCar Series driver is pictured in a white bikini!

The 10- by 13-inch posters are available at participating 7-Eleven stores along with the release of the Sports Illustrated 2009 Swimsuit Edition. However, each participating store received only 25 copies of the posters, so there’s sure to be some disappointed fans.

As we all know from attending the annual NACS Show -- and walking past the plethora of scantily-clad models -- one should never underestimate the persuasive power of sex appeal. This 7-Eleven promotion is sure to be a hit with the core c-store male clientele.

What do you think?

-- Linda Lisanti

Super Bowl Steelers' Player Steamed over no Towels at Sheetz

File this one under strange stories about celebrities and convenience stores: Two-time Super Bowl champion Jeff Reed, the kicker on the football team, faces criminal charges of disorderly conduct and criminal mischief after an alleged incident in a restroom at a Sheetz store in New Alexandria, Pa., according to a report by WTAE-TV 4.

According to a state police press release cited by the TV station, Reed, 29, allegedly damaged a towel dispenser inside the mens' restroom at the Sheetz store, after he reportedly became infuriated that it did not contain towels.

Store employees told state police they heard Reed "banging on something and that it was really loud," and Reed left the bathroom "using profane language in a loud manner" stating there were no towels in the restroom, according to the report.

Employees at the Sheetz store told WTAE Channel 4 Action News they were not allowed to talk about the incident.

Strange indeed.

Will the Economy Be Stimulated?

Friday, Convenience Store News released a special online-only report on the impact of the economic stimulus bill that was set to pass both houses of Congress and go to President Barack Obama for his signature.

Critics of the bill have jumped on the billions of dollars in wasteful spending in the $790 billion package backed by Obama, Democratic lawmakers and a handful of GOPers. They say the bill has less to do with reviving the economy than rewarding traditional Democratic constituencies. They see a bill bent on supporting Democratic political backers, expanding government to unprecedented “socialist” dimensions and consolidating the party’s hold on power.

The Republicans are right to point out that this so-called stimulus bill is really a spending plan that will lead to huge future deficits, and may not even have the desired effect of ending the current recession. Indeed, about 75 percent of respondents to CSNews’ monthly online (unscientific) poll agreed that the bill is about “spending” on “all kinds of left-wing pet projects.” Only 11 percent of respondents felt “this is just want the country needs to get people back to work and for the economy to recover.”

However, the Republicans don’t have much credibility on this issue since it was their own spending and tax policies that contributed greatly to the current deficits and recession, so the 16 percent of industry respondents that said, “I don’t like it, but something has to be done and a flawed bill is better than doing nothing,” is probably more reflective of the national sentiment about this legislation.

Now, we all have to hope this flawed bill will succeed in stimulating the economy and getting the consumer spending again. Even the most optimistic economists don’t expect much improvement this year, but we should start to see some improvement from the stimulus in 2010. However, many economists warn that the long-term costs of this bill will result in huge deficits and probably large tax increases in 2011 or 2012 that will likely bring the economy to a halt once again.

Of course, with all the different national and worldwide political and economic variables, it’s impossible to predict what’s going to happen next week, let alone in 2012. The best we can hope for is that this nation has some responsible and trustworthy leadership in these troubled times. The verdict’s still out on that as well.

-- <a href="mailto:dlongo@csnews.com">Don Longo</a>

The Far-Reaching Impact of Federal Excise Taxes

The increase of federal and state cigarette excise taxes will have a far-reaching, negative impact on the convenience store industry. With the exception of petroleum products, no other category is more vital to our success than tobacco products. Given cigarettes represent 30 to 45 percent of convenience store inside sales; the deterioration of this category will have devastating consequences.

The Federal Excise Tax (FET) will dramatically increase the cost of doing business. Inventory cost will increase by an average of $6,000 per store — $1 million dollars for a chain of 166 stores — resulting in higher interest expenses. Credit card transaction fees will increase due to soaring cigarette retails.  Internal shrink dollars will escalate due to the higher cost per carton. External theft will rise due to the value of cigarettes and the amount of inventory dollars we carry. In addition to the FET, Kentucky Legislators are proposing an incremental 30 to 45 cents per pack State Excise Tax (SET) which will compound these issues.

The FET is a direct tax on the middle-class, as 80 percent of cigarette smokers are in lower-income brackets, and in Kentucky the average annual household income for cigarette smokers is less than $32,000 dollars. During these difficult economic times, it is impossible for the average
cigarette smoker to assume a higher tax burden.  As a result, increased cigarette taxes will significantly alter the purchase behaviors of our core consumers. 

The cigarette industry is rapidly declining at three to four percent annually. Excise taxes at these levels are unprecedented, and it is difficult to project the potential sales loss. Nonetheless, many industry experts are predicting additional 6- to 10-percent declines on top of the current 3 to 4 percent trends.  In addition to the reduction in cigarette sales and gross profit dollars, retailers will also lose the sales and gross profit dollars associated with affinity purchases (other product purchased with cigarettes).

If the convenience store industry experiences double-digit sales declines in its largest inside-sales category, it will have an epic impact on the way we do business — an impact that influences our total retail strategy. With unit sales predicted to decline by more than 10 percent, retailers will need double-digit percentage increases in average retails to make up the loss in revenue dollars. While retail increases associated with the FET will make up the revenue short-fall, they will not make up the deficit in gross profit and net income dollars.

With retailers facing reduced gross profit dollars, reduced affinity sales, increased interest expense, and increased cigarettes shrink dollars; retailers will be forced to look to this category and others to make-up the loss in net income.  It is unfortunate that consumers will most likely absorb additional increases above and beyond the excise taxes. 

This daunting economy has already made it difficult for most retailers to maintain shareholder-value, and the impending FET and SET will place an additional burden on the convenience store industry. This burden will challenge us to evaluate our cigarette categories and possibly re-engineer our overall strategies. In time, prudent retailers will overcome this adversity and will prevail with a much stronger business model.

Tony Miller
Senior Vice President of Sales and Marketing
Thorntons Inc.                                                          

Local Price, Not So Nice?

Seeing new customer price sensitivity, retailers of all stripes are considering the potential of localized pricing strategies, something, of course, c-store operators have been doing for years at the gas pump.

According to a survey of retailers by RSR Research taken last fall, in the midst of the country's economic meltdown, a renewed interest in localized merchandise pricing is spurring renewed interest in retail technologies that would support that strategy.

But beyond the internal and information technology challenges -- what does "local" mean, anyway? By store, by neighborhood, by zip code, by demographic makeup? The question remains: Do customers really want to pay different prices for the same merchandise, at one chain's stores? How would they feel paying $4.49 for a sandwich at the store closest to home, but $4 for the sandwich in a store next to their office?

We see this to a degree at fast feeders. Happy Meals in Manhattan carry a much heftier price tag than those picked up in New Rochelle, N.Y., which is 25 minutes away. Considering the cost of doing business in New York City, it's understandable.

But if c-stores started selling merchandise at localized prices, would it ultimately help them price more competitively in some areas, while making a few cents more margin on the same products where they could get away with it? Can promotions be used to accomplish this without confusing or upsetting your loyal customers who may frequent more than one store?

Status Update: How are You Doing?

With the release of Sanford, N.C.-based The Pantry's first quarter earnings, President and CEO Peter Sodini said the tough economy has had an impact on its more than 1,600 c-stores.

“The current retail environment remains very challenging and we are taking action in a variety of areas to further reduce operating expenses and to strengthen our merchandise gross margins," he said.

Comparable store merchandise sales fell 3 percent compared to the comparable quarter, and comparable store gas gallons fell 7.2 percent from the first quarter of 2008.

Meanwhile, total gasoline revenues fell 21.5 percent, due to the sharp decline in average retail gas prices. Total gasoline gross profit for gas jumped on retail gross margins of 25.8 cents per gallon.

Sodini also said he expects comparable store merchandise sales and gasoline gallons will improve over the remainder of fiscal 2009. For the sake of the company and the entire c-store industry, I hope they do.

It's time for a status check -- how are your results doing?

-- Mehgan Belanger

Will a Sugar Sin Tax Hurt C-store Sales?

To raise revenues, Massachusetts recently proposed a 5 percent tax on candy and soft drinks, a levy positioned by the administration as a step toward fighting obesity.

But according to a number of studies, cited recently by the Boston Globe, a nickel or dime bump in the price of a Snickers or bottle of Coca -Cola will do little to curb demand. Good news for c-store operators and Massachusetts' coffers if the tax passes.

Not to be anti-anti-obesity, but let's call it what it is: a little hit to already struggling consumers who may no longer be able to afford the $4 mocha latte at the coffeehouse, but see a chocolate bar as an affordable treat. As one researcher pointed out, the tax is small -- and added at the register, after the purchase decision is made -- so effect on demand should be minimal.

Cigarette taxes, which have absolutely reduced sales, are much greater -- a few dollars a pack at least in the Northeast -- and hit the wallet harder.

But (you aren¹t reading this are you Dr. Novich?), on a stressful day, I, for one, wouldn¹t let an extra nickel stand between me and a Carmello bar.

Now, a 30-or 40-cent hike would make me sit up (though not do a sit up) and pay more attention to my spending and probably make me cherry-pick chocolate promotions.

How do you think your customers would react to a sugar-tax price bump?