CHICAGO -- Predictions come in many sizes: obvious, realistic, fantastical and just plain silly.
Two weeks into 2017, here are CSP’s predictions—from M&A and gasoline prices to competition and product trends—for how this new year will play out for the convenience-store industry …
1. Mergers and acquisitions
- With more major acquisitions (Speedway?), Couche-Tard will pass 7-Eleven as the retailer with the greatest number of U.S. convenience stores and begin to realize Alain Bouchard’s bold prediction of doubling the company’s size worldwide within 10 years. 7-Eleven, however, will not take that challenge lying down; it will begin to make good on its promise to double its number of U.S. c-stores at a much-accelerated pace.
- Some likely candidates for acquisition in 2017: Sunoco LP, GPM Investments, BP’s ampm, Chevron’s ExtraMile, Kroger’s c-stores, United Refining’s c-stores and Global Partners. And despite the assertion that likes its integrated supply chain, Marathon will succumb to investor pressure and spin off or sell Speedway.
- Despite general media reports to the contrary, Amazon Go will not end retail as we know it. The online retailer will continue to serve as a lab and a bellwether for new retail technology, but like Wal-Mart, its incursions into the convenience channel will remain on a small scale.
- Similarly, drone delivery will continue to be a novelty in 2017. The level of government approval and regulation required to make it commercially viable will ground that flight and lose its luggage.
- Watch for fuel volumes to remain consistent (or flat) as crude-oil supply gets muddled by inconsistent policy here at home and overseas, keeping gasoline prices closer to $3 per gallon than $2.
- The pace of retailers adding E15, the 15% ethanol blend, will quicken in 2017. Greasing the wheels:
- Higher blending volumes the Environmental Protection Agency (EPA) finalized for 2017, which would add 15 billion gallons of “conventional” biofuels—mainly corn-based ethanol—into the fueling system, matching a blending cap that Congress set 11 years ago under the expanded Renewable Fuel Standard (RFS).
- The example of several large, respected chains that have added E15 in the past two years, including Murphy USA, Sheetz, Kum & Go, RaceTrac and Thorntons. Whereas liability concerns may have previously kept fuel retailers from adding E15, perhaps the biggest issue today is an EPA restriction on selling the fuel blend during summer months in many markets.
- The availability of preblended E15 at the fuel terminal. In September 2016, HWRT Oil Co. LLC became the first in the country to offer the fuel blend, providing supply to retailers without blending equipment.
The one element that could scuttle this prediction: the incoming Trump administration and its plans for the RFS. While President-elect Donald Trump has voiced support for the standard, his pick to head the EPA—Oklahoma Attorney General Scott Pruitt—has been a critic.
- In 2017, convenience-store customers will discover that c-stores offer food. No, really. This hasn’t happened yet. Years of enhancing and expanding their foodservice offering will finally pay off for c-stores that have upped their game enough to get noticed.
- Starbucks will follow the lead of Amazon and Wal-Mart and develop a hybrid coffeehouse convenience-store format. Unlike Amazon and Wal-Mart, it will open enough locations to make the convenience channel sweat.
- Watch for a greater level of investment in c-store remodels that allot more square footage to foodservice. At the same time, the elevation of core menu categories—breakfast, pizza and coffee—will continue.
The number of city and county ordinances regulating tobacco products in 2016 rose by 170% to 670, according to the Minneapolis-based National Association of Tobacco Outlets (NATO). With that number only expected to rise in 2017, retailers should plan for continuing vigilance against anti-tobacco tactics that in 2016 included raising the minimum age for buying tobacco products, flavor bans and permitting laws.
Could this be the year extreme healthful drinks go mainstream? We're talking about aloe vera, kombucha, probiotics and the rest. The foot is certainly in the door with Coca-Cola's acquisition of Aloe Gloe and Suja, Pepsi's KeVita and Dr Pepper Snapple Group's recent purchase of Bai, not to mention a multitude of independent beverages.