CSD examines certain U.S. states that have the economic might to shoulder future industry growth.
By David Bennett, Senior Editor
San Antonio-based CST Brands Inc., a Texas-born company, is known as an industry leader not only because of its strong Corner Store brand, but the bolt-on acquisitions it achieved in the last few years. For example, in acquiring Nice N Easy Grocery Shoppes, it got a c-store chain noted for quality foodservice, but also boasting a strong customer following in New York State.
A later acquisition of Flash Foods Inc., a 182-store chain based in Waycross, Ga., brought CST a c-store well versed in technology, and a gateway into the Southeast region.
Moving forward to this year, it can be said that Couche-Tard’s recent acquisition of CST Brands might have opened up the Texas market for the Canadian retailer, but the driving force in the $4.4 billion deal was all of the dynamic assets that CST Brands had systematically pieced together, including a strong foodservice unit, as well as a technical-savvy c-store operation.
Undoubtedly, market opportunity is one of the main driving forces when a c-store operation looks beyond its operational footprint. The factors that go into the decision-making process are plentiful. When looking at a particular state, convenience retailer must consider such tangibles as demographics, how cool or hot the business climate is, the commercial taxes on the books, proposed taxes being discussed by legislators, zoning ordinances, distribution channels, etc. The list is often long and varied and has to be checked a few times.
Another factor to consider is that state’s economy. Does it foster industries that have seen better days, or is it progressively pursuing new market opportunities that spur population increases, new income tax dollars and attention from fledgling start-ups, angel financiers and business incubators?
You can almost track the development of the c-store industry by the development of the U.S. Not surprisingly, states in the industrial belt such as Ohio, Michigan and Pennsylvania were manufacturing titans, and are vital states to the c-store industry. Of course, over time, as the emphasis on new industries comes to the forefront, the tide of c-store migration begins to shift as well.
Today, the most robust economies are found largely in coastal and technology-driven states, with heavy representation in the West, according to a nationwide survey conducted earlier this year by Business Insider. Included on the list of top 10 economies were Nevada, Utah, Colorado and Washington. Unemployment rates; GDP per capital; average weekly wages; and housing prices were considered.
Last year, Utah led Forbes’ ranking of the “Best States for Business” for the second straight year and fifth time since 2010, based upon a multitude of metrics. Following the theory about c-store migration then, it’s not surprising that Maverik Inc. a few years ago relocated its corporate operations to Utah.
Not just in the Mountain West, which is home to growing cities such as Denver, but also in places as varied as Seattle in the Northwest, and Orlando, Fla., in the Southeast, employers are hiring at a steady clip, housing prices are up and consumers are spending more freely.
Of course, no state is perfect. Each has economic shortfalls, policy constraints and home-grown taxes that can chip away at a c-store’s profitability. For example, despite the fact that California is a dynamic state with a lot to offer a thriving c-store operation, environmental regulations can make it challenging to conduct business where fuel is involved.
Complaints about high tax burdens also play into boomers’ desire to leave high tax states for those with a view and that are easier on the wallet. Such migration is driving shifts in population from states such as Connecticut to locations such as Tennessee. While Florida has been both tax friendly and a magnet for retirees for a number of years, it still remains a well spring for new residents and a growing convenience store community.
Not surprisingly, Florida is a perennial addition to listings that include top states with the highest number of store locations. Conversely, it always runs at least second to Texas, which has a lot of land, a lot of people and a lot of c-stores.
In Texas, December was the 10th month of job increases in 2015. Texas ended the year with 166,900 new jobs as employers continue to add jobs and move workers to the state. Texas job growth is likely to remain positive due to continued strength in healthcare, leisure and hospitality in such cities as Dallas, Austin and San Antonio.
Economic prosperity is a big driver in a state’s population growth. A state’s economic dynamism is based on how easy it is for a new business to flourish and existing businesses to change. One measure of an economy fit for the 21st century is how well it nurtures innovation.
Cottage industries are nice, but growth industries will pay the future bills of the convenience store channel. Industry growth equals job growth, which equates to people with money in their pockets buying items in c-stores.
Again, the face of America is changing, not just economically, but also in terms of population. Millennials are the new market force. By nature, Millennials seem drawn to new employer templates: sustainable-oriented companies, high-tech organizations, community-driven businesses, etc.
A recent development within state governments—namely Colorado, Utah and Washington—is the creation of high-level positions charged with improving outdoor recreation opportunities throughout their respective states. As a result this region seems to draw adventurous Americans.
Lastly, the c-store industry is acutely aware of changing demographics in more communities. To note, Texas, Florida, Nevada and Colorado all have growing Hispanic populations, a consumer group with considerable purchasing clout.
Will the c-store landscape look different 20 years from now? Most assuredly it will. Nobody can say where the next big wave of growth within the industry will take place. But for a topic of discussion, we chose 10 U.S. states that possess the economic tangibles that we think would support a growing c-store operation looking to expand its footprint. The states aren’t ranked, but listed in alphabetical order.
We also chose states located in different regions: the Pacific, the West, Rocky Mountains, the Southwest, the Midwest, the Northeast and the Southeast. Two of the regions—the Rocky Mountains and Southeast contain a higher number of states than other regions. That’s because those regions more strongly reflect developing economic industries.
Let the discussion begin. Click here for the PDF download.