In 1990, Convenience Store Decisions debuted its first magazine issue. In January of that year, the median price of a home stood at $125,000, a loaf of white bread averaged 69 cents, a gallon of gas went for $1.09 and the convenience market still relied on ‘cokes and smokes’ to drive sales. It would be another year before the ‘World Wide Web’ went live to the public.
Just seven years prior, Chevy Chase’s character Clark Griswold in the movie “National Lampoon’s Vacation” joked, “I’m so hungry I could eat a sandwich from a gas station” — and this general consumer judgment of c-store food being of poor quality remained in 1990.
As CStore Decisions celebrates its 30th anniversary reporting on the convenience store industry, a number of c-store retailers shared their memories and insights on what they see as the major changes to the industry over the past 30 years, what’s evolved for the better and the challenges ahead.
“The biggest changes in the c-store industry have been the evolution of guest expectations and the realization that the driving force behind our future would be convenience, not gasoline retailing,” said RaceTrac Executive Chairman Carl Bolch Jr.
Over the past three decades, consumers’ definition of convenience has morphed, he said. In 1990, it meant paying for fuel inside the store and picking up a bottled beverage and tobacco product. Today, it means paying outside at the pump, then stepping inside for hot coffee, a freshly baked doughnut, snacks or lunch for later, and possibly a six-pack of beer for tomorrow’s cookout.
“Our ability to deliver on this expanded idea of convenience has allowed us to be successful in an ever-evolving marketplace,” Bolch said.
Since CStore Decisions appeared on the scene, Atlanta-based RaceTrac evolved significantly, beginning with the introduction of pay-at-the-pump technology in the 1990s. It later launched a new store prototype with grab-and-go food, freshly ground, freshly brewed coffee, a Swirl World frozen treat bar and an easy-to-navigate layout. Today, it operates more than 500 c-stores in Georgia, Florida, Louisiana and Texas.
“We have continued to innovate with the goal of delivering a more consistent and convenient experience for our guests,” Bolch said.
Bolch sees this inside-the-store evolution as reflective of the c-store industry’s best changes.
“Our ability to innovate and deliver on consumers’ desire for convenience has enabled the industry to remain relevant — and thriving — as we respond to our guests’ ever-evolving needs, particularly in the face of online retailing,” Bolch said. “It is our dedication to growing and changing with our guests that allows us to continue to play a valuable role in their daily lives.”
Robert Buhler, president and CEO of Pleasant Prairie, Wis.-based Open Pantry Food Marts of Wisconsin, as well as numerous other retailers, pointed to industry consolidation as the most significant change.
In 1990, early signs of today’s consolidated market were just beginning. Sam Wornom, co-founder of Sanford, N.C.-based The Pantry, had divested his stake in the company to investment firm Montrose Capital in 1987, and co-founder Truby Proctor Jr. followed suit in the early ‘90s, divesting his shares to both Montrose Capital and to Freeman, Spogli & Co. Chase Manhattan Capital acquired the remainder of the company, according to “International Directory of Company Histories, Vol. 36.” In 1999, The Pantry launched its initial public offering.
Buhler was an investment banker at the time and knew the people involved. “They encouraged me get into the business from investment banking and buy my family business (Open Pantry Food Stores),” — which he did.
“I remember them saying, ‘We’re gonna roll up the industry. It’s ideal for consolidation, and there are a lot of mom and pops. We’re going to go public at 1,200 stores,’ … Sure enough, The Pantry aggressively grew and basically evolved into Circle K. Others tried as well,” Buhler said.
Fast forward 30 years and the consolidation today is at an even more sophisticated level, Buhler said. He credited the c-store channel as being “an Amazon-proof industry,” as well as an industry with valuable and consistent cash flow. As a result, groups of private equity firms, both domestic and international, are coming into the c-store channel. He pointed to the most recently announced acquisition at press time — Blackburn, U.K.-based EG Group buying Westborough, Mass.-based Cumberland Farms. “When a 600-store chain like Cumberland sells, that’s a big deal.”
Buhler views the current consolidation environment as a challenge for the industry. “I think there will be larger, more national players, or regional players, that will become very dominant. They will have pricing power. They will have vendor power.”
All of which can make it tougher for smaller chains to compete.
Buhler expects to see big chains growing larger and stronger and smaller chains filling niches, but still impacted by the competition.
“Today the cost of a c-store is into the multi-millions, so that’s a huge change,” said Bob O’Connor, who recently divested his Jetz Convenience Centers to Wausau, Wis.-based Riiser Fuels and is now a consultant to Riiser Fuels. “The barriers to entry to this business now for the newbie are almost insurmountable with respect to regulations and capital, and the things you need to do to get started. I think it would be very, very difficult for a young person to come out of college and say, ‘I’m going to get into the convenience store business.’”
O’Connor expects capital will improve the c-store business. “But I think it’s also going to segregate the business, separate the wheat from the chaff. If companies have the capital to buy and support new technologies, they will grow faster and more profitable,” he said. “And if you don’t, you’ll be become more and more marginalized.”
Steve Loehr, vice president at La Crosse, Wis.-based Kwik Trip, likewise remembered the proliferation of single-store and small two-to-three store chains at the start of the ‘90s that have eroded as mergers and consolidations took hold. What’s more, fuel competition from big-box retailers arrived.
“Our stores are over twice as large today as they were 30 years ago, and the sales in each store is about three times more than we averaged 30 years ago,” Loehr said. Indeed, today Kwik Trip is building 7,500-square-foot stores that dwarf the 2,500 square-foot locations of decades past.
Foodservice & Operations Makeover
Inside the c-store, much has evolved as well. The c-store industry has moved from replenishment to refreshment, said Steven Montgomery, president of b2b Solutions LLC.
“This is shown by the sales movement from the center store to the walls,” he said, adding that some well-known chains operate with less than 10 linear feet of groceries. The major driver of this is channel blurring, he said, as more retailers seek “a convenience positioning.”
“We face an ever-increasing competitive set, including dollar stores, chain drug, supermarkets and quick-service restaurants. The convenience everywhere environment is what we live in today,” he said.
The skyrocketing importance of foodservice, as evidenced by “the growth of foodservice sales and its gross margin contribution,” is another huge shift.
Over the past 30 years, the c-store product mix “changed from tobacco products to take-and-eat food products,” noted Loehr.
In 1990, when it came to buying food at a c-store, the sentiment was essentially, ‘Who would do that?’ Loehr said. Still, Kwik Trip had begun its foray into the segment with one roller grill with basic hot dogs and a small selection of sandwiches that were shipped to the stores.
Compare that to present day, where the chain is vertically integrated and operates its own distribution center. Two or more roller grills showcase a range of items, and cold cases feature deli-type sandwiches, salads and parfaits made fresh in Kwik Trip’s commissary.
“Today our industry has become a major player in the fast food industry,” Loehr said. “Now we’re starting to do fried chicken in our stores. We’re rolling out 10 different take-home meals options, besides a very rigorous grab-and-go hot case with burgers and all kinds of sandwiches.”
Over the past three decades, competition from other channels has forced c-stores to level up in terms of best practices in operations, variety of foodservice and convenience — selling guests what they want when they want it. “Our industry is much better at doing that than we were 30 years ago,” Loehr said.
Technology around foodservice is advancing. Kwik Trip, which today operates more than 600 c-stores in Wisconsin, Minnesota and Iowa, is now testing delivery and curbside pickup.
“It’s a positive commentary about our industry that we have a lot of entrepreneurs and people that have been able to roll with the punches and the changes over the years and competition and still be the vibrant industry we are today,” Loehr said. “It’s a ‘hats off’ to the retailers in our industry being receptive and open to change and needing to change to continue to be a dominating place where our guests want to come in and now buy food.”
While some chains are still at the first stages of foodservice today, for others, market conditions forced their hand early.
In 1990, Peter Tamburro, now general manager of Marcy, N.Y.-based Clifford Fuel, was working with Valley Oil Co., a franchisee of Canastota, N.Y-based Nice N Easy Grocery Shoppes. “We were a gasoline and fuel distributor that owned several locations with full-service pumps out front and service bays. The company was just getting into the c-store business, converting two- and three-bay service stations into small c-stores.”
In those days, converting a service bay to a c-store meant pouring a floor, adding a cooler and a checkout counter loaded with cigarettes and “some siding or type of structure around the front to disguise the overhead doors that would be in the front,” Tamburro said. “Sixty percent of our business costs were tobacco products. We sold motor oils and a lot of soft drinks. There wasn’t any bottled water then.”
In 1993, when the business sold, Tamburro moved over to Nice N Easy — as vice president of franchise operations. “Nice N Easy at the time was developing the center store, as well as adding things like hot dogs and pizza, and a little more fresh-type product,” he said.
In the early ‘90s, the state of New York cut a deal with local Native American reservations to build a casino and open gas stations that sold tobacco, said Tamburro. As a result, New York c-stores saw a downward trend in cigarette sales volumes.
“The deal with the state forced (Nice N Easy) to find more sources of margin, and that’s when we decided food was going to be our future,” he said.
Tamburro pointed to the addition of fresh, quality food products, including made-to-order, healthy food as the biggest change to the industry, followed by the switch from converting two-bay stations into c-stores to building large, upscale stores.
In 2014, following the CST Brands acquisition of Nice N Easy, Tamburro joined Clifford Fuel, which had been a Nice N Easy franchisee.
In the ‘90s, Clifford Fuel had been going through the same evolution as Nice N Easy, converting two-bay stores to c-stores. Since 2014, Clifford Fuel has rebranded its stores as Cliff’s Local Market and introduced larger, more upscale new-to-industry stores with an expanded variety of products.
The coffee bar has also evolved, as it has across the industry. “That’s come from two small open pots, to a 24-foot wall of iced coffees and cold brews and just more upscale,” Tamburro said.
The entire image of the industry has shifted dramatically, he said, from what was “exclusively an impulse, high-priced environment” to a family-friendly place offering quality meals. “We’ve become a safe place to shop that’s recognized for much more than just convenience — we’ve now become a destination,” Tamburro said.
Gus Olympidis, CEO of Valparaiso, Ind.-based Family Express with 74 stores in Indiana, noted not only are c-stores getting larger, but the growth in foodservice has necessitated more parking.
“A subtle change has been the improvement in the quality of the workforce, especially in the top tier,” he added.
Like Kwik Trip, today Family Express is driven by a vertically integrated business model with its own distribution center, bakery/commissary and “logistical wherewithal.”
“The Family Express model is driven by private label and an extraordinary workforce that is very different than the one from 30 years ago,” Olympidis said.
This demand across the industry for high-quality employees brings with it new challenges in labor recruiting and retention.
Olymipidis cited perpetual innovation as one of the best aspects of the industry today, and continued consolidation as the most challenging aspect.
Tamburro pointed to the aforementioned consolidation as the greatest challenge. “Family businesses are disappearing to the Circle Ks and the EG Groups, and 7-Elevens and the Speedways are all around us,” he said. “They weren’t here until maybe five years ago. None of them.”
What’s more, he said, regulations are squeezing retailers from all angles, from a growing minimum wage to legislation on tobacco, and the increased purchase age for tobacco to 21 spreading across the country.
Reilly Musser, vice president of marketing and merchandising for Robinson Oil Corp. dba Rotten Robbie, was a freshman in high school in 1990, working in the office at the family business’ partner company during the summer. She remembers the stores as much smaller and not as cohesive in their appearance.
Today, Rotten Robbie, with 34 c-stores in California, features bigger stores with more cooler space and beer caves. “We didn’t have beer caves in the ‘90s, and we don’t want to build a store without a beer license (today),” Musser said. “We have better graphics, a more cohesive look and better lighting, too (including LEDs).”
After store upgrades and foodservice, retailers agree the introduction of scanning transformed the channel. “Back in 1990, c-stores weren’t scanning yet; stores had cash registers and separate gas consoles, and Price Book didn’t exist,” Tamburro said. ”The implementation of advanced POS units and the ability to control pricing through scanning were big changes.”
Musser remembers when the scanners arrived. “We started scanning close to 2000. (Before scanning), you would walk into a store and say ‘Does this sell?’ And every manager would say, ‘Yeah, we sell a lot of that.’ But what does a lot mean? (After scanning), we were able to put numbers against what we were actually selling,” Musser said.
Pay at the pump was also just starting in the ‘90s. “I remember some people here thinking that was going to be a problem because (they were concerned) people wouldn’t come into the stores,” Musser said.
Supply chain ordering systems have become more sophisticated, allowing retailers to order through handheld devices. Back-office paperwork has grown more streamlined.
In 1994, the first smartphone debuted to the public, but it was another 13 years before the first iPhone launched and smartphones began a mainstream climb.
Today, c-store mobile apps can activate gas pumps, and customers can pay on their mobile device. From geo-location to beacon technology and the internet of things to frictionless checkout solutions, technology is revamping the c-store business in 2019.
“The technology required and needed to win has significantly changed,” Montgomery said. “Today, back-of-the-house management requires item level cost capabilities, market basket analysis and full recipe accounting for foodservice. Also needed are volume forecasted and staff schedule to ensure customers’ product and service levels are met. This includes kiosk order and frictionless checkout.”
In 1990, O’Connor was two years into his c-store career as an owner of the Jetz family business.
“The federal government mandated that we had to start cleaning up the soil from these gas stations … the previous generation said, ‘these new regulations are too big for us to deal with,’” especially as insurance companies were pulling out of the state. O’Connor and his cousin, Tim Klein, took over the business.
Jetz had a cigar box as the cash register, as well as employees with metal change holders on their belts who pumped gas, O’Connor recalled. Many stores were still two-bay gas stations that serviced cars and had “a couple fuel pumps off to the side.”
“The stores inside were really nothing more than a small rack of candy bars, some oil, transmission fluid and a soda machine,” he said. The majority of the business was all about gasoline at that time.
Compare that to today, where c-stores offer several types of fuel, including alternatives, from electric charging stations to E15.
On the technology front, “it went from completely manual to computers today driving the whole operation. … There were no cell phones back then. Just a cell phone has allowed everybody to become so much more productive,” he said.
Technology has allowed retailers to run bigger stores without a huge increase in labor. “We used to pump the gas for every customer,” O’Connor said. “We (now) have robotic pumps that dispense the fuel. Payment processing is now robotic. I remember car washes back when I first started — you had to manually drive car wash equipment around a car.”
Technology has also allowed a central office to control more stores efficiently. But in the ‘90s it was a feat to bring stores with limited communication and technology together.
“Today, with technology, you can get real-time information,” O’Connor said.
But even as c-stores become more tech savvy, the basics are simultaneously ever more important. Stores today offer more services, look better and are a bigger part of the community than they were 30 years ago.
C-stores still face challenges with perception and community response, but many stores are getting out into their communities, giving back and showing themselves to be community stewards.
To O’Connor, what’s best about the industry now is how technology has allowed c-store retailers to know their customers better. When he first started in the business, retailers might know a customer’s name. Today they also know what they like to drink and the price points they’re willing to accept.
“We sell people their time. I think we’ve become very good at that, he said. ” I think data will continue to drive that. And I think it’s going to be a very important part of the business going forward, knowing your customer.”
Onward to 2049
“Technology implementation will change the face of the industry in the next three years in ways that may be unimaginable to most current operators,” Family Express’ Olympidis predicted. “Convenience in the future would likely include ‘delivery,’ and it would be substantially more frictionless.”
Tamburro pointed to the expanding intersection of food and technology and how it will change how stores sell food, including, “how you order — whether it be an app or online ordering, self-checkouts, delivery.”
The future of fuel is also uncertain. Cars are getting better gas mileage. “There’s more hybrids, there’s more electric vehicles coming. Outside the store, that’ll be probably the biggest change in the next 30 years, as opposed to inside,” he said.
O’Connor expects hydrogen — because no country controls it and it has zero emissions — or a similar fuel to thrive, and he expects cash to disappear in favor of electronic currency. He also pointed to the rise of augmented reality and artificial intelligence. “It’s going to rock our world,” he said.
Open Pantry’s Buhler observed this industry is “extraordinarily kind, friendly and interactive between even competitors, and it’s like no other industry in that way. … (It offers) a genuine culture that comes from the hearts of people that care about what they do and care about each other in the industry, and it’s very unique.”
That culture of caring and inclusion has helped the c-store industry band together and pivot with the times to remain relevant over the past 30 years. There’s no doubt that, whatever changes occur, the industry will transform itself along with them.
The industry has changed a lot in the past 30 years, O’Connor said. “It will continue to change at a faster pace. But the change will be good. And at the end of the day, our industry will continue to improve and better serve the needs of our consumers.”