C-Store Consolidators See More Growth
C-store "all-stars" discuss industry dynamicsat first Morgan Keegan conference
LAS VEGAS -- Despite, or perhaps because of the lingering economic recession, senior executives of several of the convenience store industry's most prominent publicly traded companies talked Tuesday about further consolidation, the continued decline of cigarettes as profit generator, the rise of foodservice and the state of the convenience channel.
Representing parts of what could be a c-store all-star team, the officials headlined the first-annual Morgan Keegan 2009 Convenience Store & Distributor Conference. They spoke before a group of mostly equity and financial representatives, as well as other retailers, at the Venetian Hotel.
Their main messagethe c-store industry remains ripe for consolidation. "We see a lot of consolidation in the small to midsized chains," said Sam Susser, the mastermind president and CEO, who has transformed Corpus Christi, Texas-based Susser Holdings Corp. from a modest-sized fuel marketer to a Southwestern retail powerhouse with more than 500 company-run stores known as Stripes.
His forecast is driven, in key part, by a limping economy coupled with declining margins on tobacco and unreliable profits at the pumpthe two primary vehicles that have powered many straddling operations.
"We think of ourselves as a high-growth company," he said. "We are very much an acquisition company in our DNA."
In addition to Susser, other presenters and panel discussion participants included: Frank Paci, CFO and executive vice president of business operations at The Pantry, Cary, S.C. Bill Walljasper, CFO, senior vice president at Casey's General Stores, Ankeny, Iowa. Jeff Turpin, chairman and CEO at Village Pantry/Worsley Cos., Wilmington, N.C., the 400-plus c-store division controlled by investment group Sun Capital Partners, Boca Raton, Fla. Tom Perkins, senior vice president of resources at South San Francisco, Calif.-based Core-Mark International, North America's second-largest c-store wholesaler. The four retailers are considered, along with Laval, Quebec-based Alimentation Couche-Tard, among the most active consolidators in the industry. And each spoke optimistically about further aggregating what are largely fragmented markets.
But unlike previous mergers and acquisitions (M&A) groups of the 1980s and 90s, they have invested significantly in store quality, from design and operations to branding, marketing and technology.
For example, Casey's, which operates more than 1,300 stores across nine Midwestern states, has rolled out a new 3,700-square-foot design that not only is larger, but expands the cold vault from nine to 14 cooler doors, gives theater to a robust food zone known for scratch pizza and doughnuts and enlarged coffee area and sports a center-store checkout. (Click here to view a recent CSPTV feature on Casey's highlighting these changes.)
And even with these investments and the fact that two-thirds of Casey's c-store competition comes from independent operators, the chain is acutely conscious of how it prices. Take Walljasper's comments about its fuel pricing strategy: "Our consumers in our small towns are very price sensitive. We don't want to lose them over 1 cent."
The Pantry's Paci shared the challenges his company is facing by a particularly harsh economy in the Carolinas and Florida, bedrock states for the 1,600-unit retailer. "The Southeast has not been as attractive as it has been," he lamented.
As a result, The Pantry, over the past year, has curbed its zest for deals and, instead, poured heavily into its assets, ramping up an impressive private-label offering, growing its partnership with Subway and solidifying Kangaroo as its core retail brand.
Core-Mark's Perkins told how his company is evolving and investing in a high-quality fresh-food offering by partnering with scores of vendors and local bakeries to ensure not only fresh, but frequent deliveries to its retail network.
The three-hour program was put together by Morgan Keegan, which said it hopes to turn this into an annual event that coincides with the NACS Show. The program was concluded by four suppliers: GasBuddy OpenStore, Retail Media Co., Titan Management Group and Consolidated Green Services.