CSP Magazine

2017 SOI: Doubling the Quartile Divide

Twenty cents further broadens the gap between the top-and bottom-quartile players

While the disparity between the industry’s top-performing companies and the bottom 25% have always been significant, it appears the gap is growing wider still.

One of the more marked differences revealed at this year’s NACS SOI Summit are the cents-per-gallon (CPG) break-even numbers. This is a metric unique to the convenience- and fuel-retail channel; it measures success by the pennies a company needs to make on a gallon of gasoline to pay underlying expenses.

Two years ago, that differential was a dime. In the 2016 data, that spread almost doubled to 19.64 cents. Top-quartile companies have to make only 8.15 cents to break even, while bottom-quartile companies must bring in 27.79 cents per gallon to do the same.

“When the guy across the street has a 20-cent advantage, that’s a problem,” said Billy Milam, president of RaceTrac Petroleum, Atlanta, who presented SOI attendees with this year’s data. “You’re in trouble.”

Across nearly all metrics, the top-performing 25% of companies participating in NACS data clearly outpaced those in the bottom quartile.

Differences in earning figures were especially striking. EBITDA (earnings before interest, taxes, depreciation and amortization) for top-tier companies was $41,670 per store per month, while the bottom 25% operated on average at a deficit of $2,861—a 25x disparity between the two.

Return-on-capital-employed figures were also devastating, with top performers hitting 13.03% and those at the bottom making only a fraction of that at 0.37%. That calculation attempts to compare top and bottom performers by factoring out the varying sizes of stores, but it doesn’t completely solve the problem: Store size also contributes to how much a facility can sell or draw traffic.

Category Close-Ups Diving into in-store category data reveals at least a few commonalities between top and bottom quartiles. With beer, top-quartile companies took in $15,717 in sales per store per month, whereas bottom-quartile companies took in $13,320, or a differential of 1.2x. Salty snacks were also close, at $6,233 for top quartile and $4,544 for bottom quartile for a differential of 1.4x.

The numbers diverge with cigarettes and packaged beverages. The differential for cigarettes is almost two times (1.9x), with top performers at $69,006 per store per month and bottom-quartile firms at $35,506. For packaged beverages, the differential is 2.4x, with top performers at $33,398 and bottom-quartile companies at $13,730.

Where the gap widens considerably is with foodservice. Prepared foods, hot dispensed beverages and cold dispensed beverages range from 3.2x to 6.6x in terms of differentials.

Both prepared food and cold dispensed beverages have differentials of 3.2x, and hot dispensed beverages are at 6.6x.

Foodservice margins, meanwhile, are promising for retailers across all quartiles. For prepared foods, the bottom-quartile companies made slightly more in margin than top performers, with 53.72% for the bottom quartile and 52.98% for top-tier companies.

Hot and cold dispensed beverages were profitable for both the top and bottom tiers in general. Despite a 24.74x differential between top and bottom quartiles for hot dispensed beverages, bottom-quartile companies still made a margin of 42.81%. (Top-tier companies made 67.55% in hot beverage margins.) On the cold dispensed side, top-tier companies made 51.98% vs. bottom-tier firms at 43.47%, or an 8.61x differential.

“The [bottom tier] is not heavily discounting these [categories] anymore,” said Andy Jones, president and CEO of Sprint Food Stores, Augusta, Ga., who presented category data for SOI attendees.

Labor Pains

Labor metrics yielded the most parity between top- and bottom-quartile companies, at least in terms of general fluctuations. Almost all companies saw an increase in labor costs as retailers reacted to lower unemployment rates and a shrinking labor pool. Turnover at nonmanager levels was similar between top and bottom performers, with top chains showing a 97.6% annual turnover and bottom chains slightly higher at 101.9%. In-store sales per labor hour was $95.71 for top-tier chains and $90.13 for bottom-tier chains.

The important difference came with margins. Top-tier companies had $32.27 in gross-profit dollar per labor hour, while bottom-tier companies were almost $10 lower at $23.97. “We’ve never seen this degree of disparity,” said Milam of RaceTrac. “When you see [a disparity in productivity] of 10x, that’s a failure to me.”

More: Reshaping How (and Where) Consumers Eat


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