Top C-Store Surprises of 2017

By 
Greg Lindenberg, Editor, CSP

surprised face

CHICAGO -- The convenience-store industry is nothing if not surprising, and 2017 proved to be a year chock full o’ stories that caught even longtime industry observers off guard.

Some of the surprises were in mergers and acquisitions (M&A)—big deals that happened and some that didn’t. Others were about unique, strange or unexpected marketing, merchandising and operational choices.

Here’s a look back at some of the stories this year that nobody saw coming (and the year ain’t over yet) …

The glitch that stole Christmas: Amazon Go yet to launch

Amazon Go store

The delay in Amazon getting its much-heralded and much-hyped Amazon Go cashierless convenience store off the ground and open to the public in 2017 was almost as big of a surprise as the unveiling of Amazon Go itself in late 2016.

Amazon Go was originally due to be ready for public use by the end of March 2017, but nine months later it still has yet to launch beyond the single-location employee test. The company has reportedly been fixing a glitch that has caused the cameras, sensors and algorithms meant to track customers in-store to have trouble dealing with more than 20 people in the store at one time, hindering the store’s ability to accurately charge customers for their purchases.

But don’t necessarily take the delay as a sign of failure on Amazon’s part. If it works out the bugs, Amazon Go could be the disruption story of 2018. And other retailers around the world are tinkering with the technology and the concept, hoping to beat Amazon to the punch.

Texas two-step: 7-Eleven buys 1,100 Sunoco c-stores

7 eleven sign

In April, Seven & i Holdings Co. Ltd., the Tokyo-based parent company of 7-Eleven Inc., announced it would acquire 1,110 c-stores from Sunoco LP for $3.3 billion, its biggest deal ever.

The transaction, which the companies expect to close in January 2018, includes stores in 19 regions primarily along the East Coast and in Texas, and the trademarks and intellectual property of the Stripes c-store brand and Laredo Taco Company foodservice concept.

The deal also helps Irving, Texas-based 7-Eleven retain its spot as the biggest c-store chain in the United States.

Sunoco, which is largely but not completely exiting retail, also is selling 207 c-stores in north and west Texas, New Mexico and Oklahoma in a separate process.

In December, Sunoco said it signed definitive agreements with a commission agent to operate the retail sites in West Texas, Oklahoma and New Mexico that were not included in the 7-Eleven transaction. Sunoco said it expects the conversion of these sites to the commission agent, an unnamed “proven operator,” to occur in first-quarter 2018.

Spin zone: C-stores toy with fidget spinners

fidget spinners

The fidget spinner, a top-like toy that spins on a set of ball-bearings, was the most unlikely bit of merchandise to hit c-stores in 2017.

The device was reportedly designed to help calm people who suffer from anxiety and other neurological disorders such as ADHD and autism. It has been promoted as helping people who have trouble focusing or those who fidget by relieving nervous energy or psychological stress.

Kids discovered the devices, teachers banned them (great incentive!) and demand soared to near Beanie Baby levels.

In May, 7-Eleven Inc. was among the many c-store chains that began selling fidget spinners as a ready-made point-of-purchase impulse buy.

‘Tis the season: Couche-Tard acquires Holiday Stationstores

couche tard

In July, Alimentation Couche-Tard Inc. signed an agreement with Holiday Cos. to acquire Holiday Stationstores Inc.

Holiday’s assets, located in the upper Midwest, include 522 company-operated and franchised convenience stores, a food commissary and a fuel terminal. It operates 374 stores, and franchisees operate 148 stores. It has a presence in 10 states—Minnesota, Wisconsin, Washington, Idaho, Montana, Wyoming, North Dakota, South Dakota, Michigan and Alaska—six of which are new to Couche-Tard: Idaho, Montana, Wyoming, North Dakota, South Dakota and Alaska.

With this deal, Couche-Tard will be in a total of 48 U.S. states, the most of any c-store retailer in the country.

The deal closed in late December. Couche-Tard and its affiliate CrossAmerica Partners LP received clearance from the U.S. Federal Trade Commission (FTC) after agreeing to divest 10 gas stations to settle FTC charges that the Holiday acquisition would violate federal antitrust law.

That acquisition juggernaut Couche-Tard would gobble up another chain is not surprising. What is surprising is that Holiday, previously the 18th-largest c-store chain in the country, was ready to sell and that Couche-Tard plans to keep the Holiday name and brand rather than convert all of the sites to the new global Circle K brand and leverage synergies and best practices from the chain to improve its overall network, especially in foodservice, a Holiday strength.

Change at the top: Moran steps down as RaceTrac CEO

racetrac

In July, Allison Moran stepped down unexpectedly as CEO of RaceTrac Petroleum Inc.

“As of July 24, Allison Moran no longer serves our company as CEO,” the Atlanta-based company said. “RaceTrac will continue to benefit from Allison’s 23 years of experience as she remains a member of the board of directors.”

The company did not provide any specific details about her decision. A spokesperson said that RaceTrac is not for sale, and that Moran is leaving “for personal reasons.”

Billy Milam, president, and Max McBrayer, chief supply officer, will work directly with executive chairman Carl Bolch Jr. McBrayer also serves as RaceTrac’s interim CFO.

Bolch handed over the CEO title to his eldest daughter in late 2012. He held both titles for most of his 45 years with RaceTrac before transitioning one of them to Moran.

Brick and ‘Mortar’-fied: Amazon acquires Whole Foods

whole food market

In a brick-and-mortar coup that sent shock waves throughout retail, Amazon acquired specialty grocer Whole Foods Market in August for approximately $13.7 billion.

The deal promises to disrupt the grocery and related businesses by bringing Seattle-based Amazon’s e-commerce acumen to an already disruptive physical supermarket chain. It immediately lowered some prices at the Austin, Texas-based chain, which has a reputation of having high prices.

Amazon is already disrupting brick-and-mortar retail in other ways. The Whole Foods acquisition joins Amazon’s new physical bookstores; the Amazon Go cashierless convenience-store test; and the Amazon Instant Pickup stores, where customers can pick up merchandise ordered online within minutes. It is also reportedly eyeing the pharmacy business and could acquire a drugstore chain.

Amazon recently consolidated its physical retail and fast-delivery operations—including its c-store unit—under company veteran Steve Kessel, a lieutenant of CEO Jeff Bezos, as it integrates Whole Foods with related businesses.

Sun of a gun: Solar eclipse glasses shine

solar eclipse

The total solar eclipse Aug. 21 offered c-stores a unique traffic-driving opportunity: selling official solar-eclipse glasses that allow observers to view the cosmic event safely.

7-Eleven, Casey’s, Circle K, Love’s, Maverik, Pilot Flying J and Twice Daily were among the retailers who jumped on the eclipse wagon and sold the glasses.

Retailers, place your orders: The next total solar eclipse visible from North America will be in April 2024.

No-spin cycle: Marathon Petroleum keeps Speedway

speedway gas station

In September, Marathon Petroleum Corp. announced its long-awaited decision not to spin off its Speedway LLC c-store network, a culmination of a more than eight-month strategic-review process that the company called “rigorous and independent.” An activist shareholder called for the review late last year.

Enon, Ohio-based Speedway has a 2,730-unit convenience-store network that spans 21 states.

  • Speedway ranked No. 3 in CSP's 2017 Top 202 list of the largest c-store chains in the United States.

Keeping Speedway as an integrated business within Marathon Petroleum “drives the greatest long-term value for MPC shareholders,” MPC’s board said.

The reasons it cited for the decision include the loss of integration synergies, limited-value fuel-supply agreements, market volatility and vulnerability, and the loss of retail growth opportunities, among other factors.

While Marathon Petroleum president and CEO Gary Heminger consistently signaled the decision not to spin off Speedway, the outcome was by no means certain. Speculation was already naming likely contenders to acquire a spun Speedway, including, of course, Couche-Tard and 7-Eleven.

Bad vibes: Bodega’s epic marketing fail

bodega cat

In September, the unveiling of a new, automated retail concept by two Silicon Valley entrepreneurs ended up being a lesson in hubris and the power of social media. Bodega, named after the iconic, local corner stores in New York and other urban markets, would make those traditional bodegas obsolete, the entrepreneurs claimed.

The company would stock the 5-foot-wide, 3-foot-deep “pantry box”—similar to a vending machine or hotel minibar—with a customizable assortment of nonperishable items commonly found in corner stores, such as snacks, candy, soup, beverages, pain relievers, toothpaste, shampoo and laundry detergent. Customers could unlock the unit with a cellphone app, and cameras register what they remove, charging their credit cards as necessary.

The company would place Bodegas in apartment buildings, gyms, offices and on college campuses.

The problem? The claim that the concept would put genuine bodegas out of business was met with a swift backlash on social media, which branded the misappropriation of the name as culturally insensitive to Hispanics, and which came to the defense of the independent, mom-and-pop retailers who run the traditional bodegas.

Will bodega be back? For the answer to that question, you’ll have to read the Top C-Store Surprises of 2018.

Supermarket sweep: Kroger c-store review

kroger store

Supermarket retailer The Kroger Co., Cincinnati, said in October that it is exploring strategic alternatives for its convenience-store business, including a potential sale.

Kroger's c-store business includes 784 locations in 18 states under the Turkey Hill Minit Markets, Loaf 'N Jug, Kwik Shop, Tom Thumb and QuickStop banners.

Kroger's c-store business generated revenue of $1.4 billion in inside sales. Including fuel, its c-store business generated $4 billion in total sales last year. It sold 1.2 billion gallons of fuel in 2016.

Selling the c-store business could yield $1 billion to $2 billion that Kroger could reinvest back into its core business at a time it is trying to compete with Walmart and Amazon for consumers’ grocery business.

Industry observers have speculated for so long that Kroger would sell its c-stores, without it happening, that the fact it is actually considering such a move is surprising. Interest in these sites appears to be “high,” and the sale and acquisition of these c-stores could change the face of both the grocery and the convenience channel.

Carrying a torch: The return of Amoco

amoco

In October, BP announced that it is reintroducing the Amoco retail fuel brand to the U.S. market, “giving current BP marketers more growth options in select U.S. markets and helping BP boost retail fuel sales nationwide.”

London-based BP acquired Amoco in 1998 and eventually rebranded the stations to BP. The Amoco brand and its once-iconic torch logo has been absent from the U.S. marketplace for about a decade.

  • Click here to read industry expert Gerald Lewis’ commentary on the rebranding effort.

Some U.S. BP-branded marketers lobbied for BP to bring the Amoco brand back or even change the name of the entire company in the aftermath of the BP oil spill in the Gulf of Mexico in April 2010 that would wind up costing it nearly $19 billion.

Warren’s piece: Buffett invests in Pilot Flying J

pilot travel center

In October, Warren Buffett’s Berkshire Hathaway Inc. made a significant minority investment in Pilot Flying J. Berkshire Hathaway acquired a 38.6% equity stake in the travel-center company. The Haslam family will continue to hold a majority interest with 50.1% ownership in the company, and FJ Management Inc., owned by the Maggelet family, will retain 11.3% ownership until 2023. Then Berkshire Hathaway will become the majority shareholder by acquiring an additional 41.4% equity stake, and the Haslam family will retain 20% ownership in the company and remain involved with the company.

Knoxville, Tenn.-based Pilot Flying J is one of the largest operators of travel centers in North America, with more than 750 locations in 44 states and Canada, more than $20 billion in revenues and more than 27,000 employees.

Some pundits are wondering why Buffett would be interested in a truckstop, fuel and traditional transport play when electric vehicles and autonomous trucks threaten to disrupt the trucking industry. Only the Oracle of Omaha knows for sure.

Living on Tesla time: EV maker opens a c-store

tesla c-store

In November, electric-car maker Tesla opened two 40-stall Supercharger stations in Kettleman City and Baker, Calif., that resemble c-stores. The stations house lounges offering similar amenities to c-stores, including access to food and craft beverages, a children’s play wall, a pet-relief area and outdoor space for families. They also feature a retail section where customers can purchase Tesla-branded items.

With the construction of these members-only Supercharger stations in California, Tesla is sharing its vision of what electric-car-charging infrastructure and amenities should look like: a place to relax, shop, eat and drink and distract the kids.

Lip service: 7-Eleven launches cosmetic line

7 eleven simply me beauty line

7-Eleven Inc. didn’t blush in November when it launched Simply Me Beauty, a line of cosmetics. The makeup brand consists of 40 assorted items including cosmetics and accessories for the face, eyes and lips. All the items, priced $3 to $5, are appropriate for any age, but were designed to appeal to busy millennial-aged women who are juggling business and family, as well as personal self-care, the company said.

It's an unusual product line for a c-store. Some retail-industry observers think it is a move designed to compete with the likes of Walgreens and CVS and others in the drugstore channel.

Convenience never seemed so … chic.

Opioid crisis gets real: Sheetz combats heroin use

blue light bathroom heroin

As opioid drug use has risen to epidemic proportions across the United States, c-store retailer Sheetz Inc. is looking at ways to combat heroin use in its stores. In December, in one store, the Altoona, Pa.-based chain began testing the effectiveness of blue lights in deterring heroin users from getting their fix in Sheetz restrooms. The lights are meant to make it more difficult for those in the location’s restroom to find their veins.

The test is taking place in the restroom of the Sheetz store in New Kensington, Pa.

Nerd alert: Capt. Kirk beams down to the NACS Show

stark trek william shatner

Finally, a personal entry in this series of surprises. As a lifelong science-fiction fan, I was gobsmacked that NACS featured William Shatner, aka Capt. James T. Kirk from “Star Trek,” as the closing speaker for the 2017 NACS Show in October.

The actor, writer, singer, Golden Globe and Emmy winner, pitchman and philanthropist was in full raconteur mode as he spoke to an auditorium packed with people who, for a little while, weren’t c-store retailers or suppliers but fans of "Star Trek," "Rescue 911," "T.J. Hooker," "Boston Legal" and even the Priceline commercials. The only thing missing from this would-be sci-fi convention were the costumes. (They made me check my phaser at the door and change back into my editor’s clothes before they would let me in.)

While Shatner spent little time actually talking about c-stores—I’m not sure Capt. Kirk has ever been (will ever be?) in one, but T.J. Hooker surely has—for an hour or so, he shared anecdotes from his storied and sometimes silly life and managed to inspire a room full of convenience-industry executives to go where no retailer has gone before.

What other stories surprised you in 2017? Let me know at [email protected].