"Better than last year.”
For c-store retailers who participated in this year’s CSP Outlook Survey, this one statement sums up 2014.
In fact, more than 75% of participants said current business conditions were “good” or “excellent,” making this a record high in the 10-year history of the annual survey, which gauges retailer optimism for the year ahead. Compare this to the 58% of retailers who found similar conditions in 2013 and 2012, or a 50% average for the past 10 years.
And more than 60% expect business conditions in 2015 to be even better, which is the highest percentage since 2009, when the economy hit rock bottom.
The reason for all of the positive thinking? Let’s start with the improving economic conditions, in a year when the unemployment rate finally fell back to pre-recession levels and growth in the gross domestic product beat expectations in the most recent quarter. It’s a trend that is finally—finally—trickling down to the street level.
“We have more customers,” said one retailer who described business conditions as excellent. “Construction traffic is coming back,” said another. “[The] regional economy [is] on the upswing,” observed a third.
Another key driver for 2014: “Gas margins are good,” as many retailers commented when asked to explain their optimism. Nearly 33% of retailers said their fuel margins this year were higher than in 2013. This is more than double the percentage of retailers polled in 2013 and 2012, and a reflection of what some say may be the best year for retail fuel margins—ever.
That’s not to say there aren’t the usual headwinds. As in previous Outlook Surveys, credit-card fees ranked among the top hurdles for retailers in 2014, with more than 54% saying it was their top challenge. Tied for second: issues related to implementing the Affordable Care Act (which ranked as the top challenge for retailers in 2013) and, surprisingly, continued economic weakness despite the collective optimism.
Indeed, while most retailers saw general improvements in their local economy, just less than one-quarter of those surveyed were dealing with “flat” or “poor” business conditions.
“We are not gaining any new customers, and I also think we have lost some of our ‘regular’ ones,” one of these retailers said.
“The consumer is very cost-conscious with every purchase made in my area,” said another.
“It’s the economy (stupid),” said a third.
But those citing the economy as a challenge also fell below 40% for the first time since the Outlook Survey was introduced.
What follows are highlights of the 2014 CSP Outlook Survey, ranging from the economic outlook to retailers’ expectations and plans for the c-store’s major money makers. A quick review of the numbers shows that the industry is poised to start 2015 on a highly positive note.
Economic Overview
More than 75% of c-store retailers polled in the CSP Outlook Survey said business conditions in 2014 were “good” or “excellent,” the highest percentage in the history of the survey. More than 60% expect some or great improvement in 2015. Considering that more than 56% of survey participants this year were chains with one to 20 stores, it’s an assessment that shows even small businesses—the c-store industry’s core—are finally feeling an economic lift.
How would you describe current business conditions?
| 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | |
| Excellent | 6.7% | 6.4% | 6.8% | 2.3% | 3.7% | 7.1% | 5.3% | 10.6% | 6.7% | 13.5% |
| Good | 52.5% | 41.8% | 44.6% | 37.0% | 36.0% | 41.8% | 37.8% | 48.2% | 52.0% | 62.0% |
| Flat | 26.7% | 31.8% | 39.9% | 41.2% | 51.5% | 40.1% | 42.0% | 36.0% | 34.7% | 22.7% |
| Poor | 14.1% | 20.0% | 8.7% | 19.5% | 8.8% | 11.0% | 14.9% | 5.2% | 6.7% | 1.8% |
Source: CSP Outlook Survey 2005-2014
How do you anticipate your 2014 sales will compare to 2013?
| Somewhat higher | 55.2% |
| Remain the same | 26.4% |
| Much higher | 11.7% |
| Somewhat higher | 5.5% |
| Much lower | 1.2% |
Source: CSP Outlook Survey 2014 (unless noted otherwise)
What do you expect will happen to business conditions next year?
| 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | |
| Great improvement | 3.7% | 1.0% | 4.0% | 3.9% | 0.5% | 10.5% | 4.0% | 6.8% |
| Some improvement | 49.0% | 48.2% | 56.6% | 46.2% | 39.9% | 47.0% | 46.7% | 53.4% |
| Remain the same | 37.6% | 30.0% | 30.2% | 44.4% | 45.2% | 25.9% | 32.0% | 28.8% |
| Somewhat decline | NA | NA | NA | NA | 12.8% | 13.2% | 14.6% | 10.5% |
| Greatly decline | NA | NA | NA | NA | 1.6% | 3.4% | 2.7% | 0.5% |
Source: CSP Outlook Survey 2005-2014
CONTINUED: Profit Centers & Industry Challenges
Challenges
It’s clear that even with the passage of the Durbin Amendment, which placed limits on interchange fees that Visa, MasterCard and banks charge on debit-card transactions, retailers are still feeling the pinch of swipe fees. Fifty-four percent of retailers polled in
the 2014 Outlook Survey cited credit-card fees as their biggest challenge. Tied for second: issues related to implementing the Affordable Care Act, and continued economic weakness.
For many retailers surveyed, competitive pressures—inside and outside the channel—made business tough in 2014, with 54% citing this among their stiffest challenges. “Dollar General opened close to my store,” said one retailer who described business conditions as “flat.” “Inside sales [are] slow due to Dollar Generals and such moving to small towns,” complained another. “Gas is hard to make money [on] because of large operators.”
What are the top three biggest business challenges you face today?
| Credit-card fees | 54.0% |
| Affordable Care Act | 36.8% |
| Continued economic weakness | 36.8% |
| Increased competition—c-stores | 31.3% |
Increased competition—nontraditional retailers (food, drug, mass, dollar) | 25.2% |
| Minimum-wage increases | 25.2% |
| Employee turnover | 24.5% |
| Regulatory pressures | 16.0% |
| Declining fuel demand | 14.7% |
| Volatility/reduced margins on fuel | 12.9% |
| Availability of capital | 8.0% |
| Other | 4.3% |
Among the competitive channels, which are the biggest threats to the c-store channel?
| Dollar stores | 52.8% |
| Grocery and supermarkets | 34.4% |
| Drug stores | 24.5% |
| Mass merchandisers (e.g., Walmart, Target) | 33.7% |
| Club stores (e.g., Costco, Sam’s Club) | 28.9% |
| Restaurants | 6.8% |
| Other | 8.0% |
Note: Respondents could pick as many options as they wished.
Profit Centers
While more retailers are feeling good about business conditions, that doesn’t mean they are ready to jump back into investing in their business. Surprisingly, less than half of retailers surveyed said they planned to make a change to their business model in 2015, a recent low point in the history of the survey.
Of those who planned a change, more than two-thirds expect to remodel or refresh their stores. Just less than half plan to increase their focus on inside sales and add or expand profit centers. Foodservice was by far the most popular profit center among Outlook Survey participants, chosen by 64%, followed distantly by coffee.
Nearly 60% of retailers surveyed were planning to add new stores, by building or buying them, which is about in line with previous years’ surveys.
Interestingly, among those not planning a change, only 6% said it was because of lack of access to capital, marking a steady decline as a discouraging factor over the past few years of the survey.
What changes will you make?
| Remodel/refresh stores | 68.0% |
| ncrease emphasis on inside sales | 49.3% |
| Add or expand profit centers | 46.7% |
| Grow by building new sites | 32.7% |
| Grow by acquisition | 25.3% |
| Small, strategic selloffs of stores | 13.3% |
| Introduce new store brand | 12.0% |
| Introduce new fuel brand | 9.3% |
| Sell off major chunks or entire business | 5.3% |
| Other | 6.7% |
Which of the following profit centers, if any, are you planning to add or change in 2015?
| Foodservice | 64.0% |
| Coffee | 42.7% |
| Alcohol beverages | 33.3% |
| Fountain | 28.0% |
| Tobacco | 24.0% |
| Candy/snacks | 24.0% |
| Packaged beverages | 24.0% |
| Car wash | 17.3% |
| Financial services | 12.0% |
| HBC | 12.0% |
| Other | 14.7% |
If you are not making a change to your business model, what are the reasons?
| Current model is satisfactory | 53.0% |
| Uncertain economic conditions | 19.3% |
| Lack of satisfactory sites | 9.6% |
| Regulatory burdens | 8.4% |
| Uncertainty about pending tax changes | 8.4% |
| Lack of access to capital | 6.0% |
| Competition for acquisitions | 4.8% |
| Other | 3.6% |
Note: For the bar charts, respondents could pick as many options as they wished.
Which new product or service has been the biggest success in 2014?
By order of popularity:
- Foodservice (pizza, made-to-order subs, chicken, roller grill)
- E-cigarettes
- Vaping products
- Coffee
- Milk shakes
- Energy drinks
- Frozen beverages
- Packaged beverages (bottled water, beer)
- Healthy items (fresh fruit cups)
- Cellphone accessories
CONTINUED: Foodservice & Fresh Foods
Foodservice
More than one-half of c-store retailers participating in this year’s Outlook Survey have a self-serve offer, and another 20% plan to expand it or launch a new one. Prepared-on-site programs are on the menu at nearly 38% of retailers.
More than 45% of participants offered only coffee, with this group roughly split between private- and supplier-branded programs. Coffee was also the most popular area of change retailers planned for 2015, with nearly 38% having an expansion of the coffee bar on tap for next year. Expanding the fountain and launching a new, proprietary foodservice program tied for third.
If you plan to launch or expand a proprietary foodservice program in 2015, what form will it take?
| Prepared on site | 28.4% |
| Self-serve | 20.6% |
| Made-to-order | 19.1% |
| Commissary-based | 13.5% |
| Other | 1.4% |
What is your current approach to foodservice?
| Self-serve | 53.2% |
| Made on site | 37.6% |
| Branded QSR | 27.7% |
| Made to order | 26.2% |
| Coffee only (private brand) | 25.5% |
| Coffee only (supplier brand) | 19.9% |
| Commissary-based | 14.2% |
| We do not offer foodservice | 10.6% |
| Other | 4.2% |
What additions, if any, to your foodservice offering are you planning in 2015?
| Expand the coffee bar | 37.6% |
| Expand fountain | 27.0% |
| Launch a proprietary program | 27.0% |
| Expand frozen carbonated beverages | 17.7% |
| Launch a branded QSR | 12.1% |
| We do not plan additions to foodservice | 32.6% |
| Other | 2.8% |
Note: Respondents could pick as many options as they wished.
Fresh Forward
More than three-quarters of retailers surveyed said they sell fresh and healthful food, with sandwiches and/or wraps, fresh whole fruit and bars the most common offers. However, operators still seem to be wrestling with how to answer growing demand in this area. While nearly 44% are already responding by expanding their healthful food offer, about the same amount are still trying to determine next steps.
What fresh and/or healthful foods are your biggest sellers?
| Sandwiches and/or wraps | 63.0% |
| Fresh whole fruit | 51.9% |
| Cereal and granola bars | 41.7% |
| Salads | 38.0% |
| Nuts | 37.0% |
| Yogurt | 36.1% |
| Fresh-cut fruit | 18.5% |
| Other | 1.9% |
Note: Respondents could pick as many options as they wished.
What is your outlook on fresh and/or healthful food offerings?
| Demand is growing; we are expanding our offering. | 43.6% |
Demand is growing, but we have not decided our next steps. | 42.9% |
| Demand is flat or nonexistent. | 13.5% |
CONTINUED: Fuel Outlook
Fuel
“Volumes are up and margins are up.”
“Good gas margins.”
“Sales are up and continue to improve, and fuel margins are stronger than they have been.”
When it comes to fuel in 2014, healthy margins are the main takeaway. Nearly one-third said margins were higher in 2014 compared to 2013, while only about 8% said they were lower. Compare this to the past two years, when the numbers were reversed.
Similarly, retailers saw better volumes in 2014 than in 2013. However, when asked about their long-term expectations for fuel demand, more than one-half expected flat or declining gallons in the years ahead.
Do you plan to make changes in your fuel offering in 2015?
Only one-quarter of retailers plan to change their fuel offer next year, with a revamp or expansion of the fuel islands the most popular move. Adding alternatives to gasoline ranked second, with diesel and CNG the most popular options.
| Yes | 25% |
| No | 75% |
Were your fuel margins higher, lower or about the same in 2014 compared to 2013?
| About the same | 49.2% |
| Higher | 32.6% |
| Lower | 8.3% |
| We do not sell fuel | 9.9% |
Were your fuel volumes higher, lower or about the same in 2014 compared to 2013?
| About the same | 43.2% |
| Higher | 28.0% |
| Lower | 18.2% |
| We do not sell fuel | 10.6% |
What are your long-term expectations for fuel demand?
| Slight growth (0% to 5%) | 37.9% |
| Static | 30.3% |
| Slight decline (0% to 5%) | 18.2% |
| Strong growth (> than 5%) | 10.6% |
| Great decline (> than 5%) | 3.0% |
Which alternative fuel has the greatest growth potential in the c-store channel today?
| Ethanol blends | 27.3% |
| Diesel | 22.7% |
| Compressed natural gas | 22.0% |
| Electric charging | 8.3% |
| Biodiesel | 6.8% |
| Hydrogen | 3.0% |
| Propane | 1.5% |
| Other | 8.4% |
What changes do you plan to make to your fuel offering in 2015?
By order of popularity:
- Revamp/expand fuel islands
- Add diesel
- Add compressed natural gas
- Add new marketing technology
- Change fuel brands
- Add biodiesel
- Add E85
- Add E15
- Add electric-car charging station
CONTINUED: Tobacco & Beverages
Tobacco
Nearly 75% of Outlook Survey participants plan to tweak their tobacco set in 2015. The top two growth areas are electronic cigarettes—chosen by more than 62% of retailers with growth plans—and vaping products.
Similar to previous years, cigarettes will be giving up the most space, with premium, make-your-own/roll-your-own and subgeneric/private label the top choices for cuts.
Will your tobacco section grow, shrink or stay the same in 2015?
Grow some product categories, shrink others | 36.0% |
| Stay the same | 26.4% |
| Shrink | 19.2% |
| Grow | 18.4% |
In what area(s) will you grow your tobacco section?
| Electronic cigarettes | 62.4% |
| Vaping products | 54.4% |
| Moist smokeless | 22.4% |
| Single cigars | 15.2% |
| Flavored cigars | 15.2% |
| Make-your-own and roll-your-own cigarettes | 12.0% |
| Small-pack cigars | 10.4% |
| Branded discount cigarettes | 10.4% |
| Premium cigarettes | 9.6% |
| Subgeneric/private-label cigarettes | 6.4% |
| Snus | 5.6% |
Note: Respondents could pick as many options as they wished.
In what area(s) will you shrink your tobacco section?
| Premium cigarettes | 27.2% |
| Make-your-own and roll-your-own cigarettes | 18.4% |
| Subgeneric/private-label cigarettes | 17.6% |
| Snus | 16.0% |
| Branded-discount cigarettes | 14.4% |
| Small-pack cigars | 12.0% |
| Electronic cigarettes | 12.0% |
| Flavored cigars | 11.2% |
| Single cigars | 11.2% |
| Vaping products | 3.2% |
| Moist smokeless | 1.6% |
Note: Respondents could pick as many options as they wished.
Packaged Beverages
Nearly two-thirds of retailers CSP surveyed plan to change up their packaged-beverage offer in 2015. Popular segments to amp up include energy drinks, beer and iced tea. Carbonated soft drinks leads as the most likely subcategory to lose space, followed by flavored water and energy shots.
Will your packaged-beverage section grow, shrink or stay the same in 2015?
| Grow some product categories, shrink others | 43.2% |
| Stay the same | 34.4% |
| Grow | 20.0% |
| Shrink | 2.4% |
In what areas will you grow your packaged-beverage section?
| Energy drinks | 51.2% |
| Beer | 46.4% |
| Iced tea | 28.0% |
| Flavored water | 25.6% |
| Bottled water | 25.6% |
| Wine | 22.4% |
| Sports drinks | 20.0% |
| Sparkling water | 13.6% |
| Refrigerated coffee drinks | 12.8% |
| Carbonated soft drinks | 12.0% |
| Energy shots | 9.6% |
Other types of alcohol beverages | 7.2% |
| Other | 1.6% |
Note: Respondents could pick as many options as they wished.
In what areas will you shrink your packaged-beverage section?
| Carbonated soft drinks | 36.0% |
| Flavored/enhanced water | 14.4% |
| Energy shots | 14.4% |
| Sparkling water | 14.4% |
| Refrigerated coffee drinks | 13.6% |
Other types of alcohol beverages | 8.8% |
| Sports drinks | 8.8% |
| Energy drinks | 7.2% |
| Iced tea | 7.2% |
| Wine | 7.2% |
| Bottled water | 5.6% |
| Beer | 3.2% |
| Other | 4.2% |
Note: Respondents could pick as many options as they wished.
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