SOUTH SAN FRANCISCO -- Getting bigger by becoming more efficient: That’s the key to growth for one of the convenience-store industry’s largest distributors.
In a presentation to analysts at the recent ICR Conference 2016 in Orlando, Fla., Thomas Perkins, president and CEO of Core-Mark Holding Co. Inc., South San Francisco, Calif., outlined the company’s path to growth. It hopes to build upon 18 consecutive quarters of same-store sales growth and the more than $11 billion in sales it expects to hit in 2015.
Core-Mark has 30 distribution centers in the United States and Canada, and distributes around 53,000 SKUs from 4,900 vendors. It serves around 38,000 c-store sites across the United States, including chains such as Maverik, Circle K and, most recently, Murphy USA.
Perkins said three key initiatives will be key to Core-Mark’s growth in coming years.
- Consolidating distribution. “The convenience store industry probably has the most inefficient supply chain,” said Perkins, noting a 7-Eleven study that found its average site was buying from 43 vendors and getting more than 50 deliveries per week.
About 46% of in-store sales comes from product sold to c-stores by broadline distributors such as Core-Mark, with 30% from manufacturers who prefer to distribute their own products—Coca-Cola, PepsiCo and beer vendors, among others. The remaining 24% is delivered by several direct-store-delivery (DSD) vendors, supplying everything from ice cream and dairy, to fresh salads and sandwiches, to novelties and batteries.
“They’re all converging on this small parking lot for the small-square-foot building to deliver that product,” said Perkins.
Core-Mark is targeting not only growing that 46% of in-store sales, but also taking some of the 24% currently owned by DSD vendors through its Vendor Consolidation Initiative (VCI). This program leverages Core-Mark’s more than 600 tri-temperature trailers, which can carry the fresh items that many retailers emphasizing for growth, and offers assortment optimization services.
- Focusing on fresh and foodservice. The whole area of fresh is not only a big opportunity for c-store retailers, but for distributors such as Core-Mark as well.
“The more product we can fit onto our truck, we can make more frequent deliveries, because it pays for that second delivery,” said Perkins. “Now when you’re in this store for the second time, what happens is you can start to offer a fresher product with a shorter code date.”
It’s also more profitable for Core-Mark; fresh has a bigger margin that traditional categories, or an average of 20%, compared to about 13% for traditional categories.
Core-Mark has considerable opportunity with current accounts to grow fresh; for example about 53% of its current customers buy fresh juices, and just over 19% buy whole produce, showing how much room remains in this segment.
- Harnessing big data. Core-Mark’s Focused Marketing Initiative aims to provide “transformative” category-management expertise to small retailers. In its own analysis, Core-Mark found that independent retailers make about $30,000 less in bottom-line profits than chains do. While independents’ store size and locations are similar in quality to chains, “they didn’t have the category-management and marketing expertise that a chain has,” said Perkins, noting that chains typically have a category management team on staff.
Core-Mark want to help its independent customers become better merchandisers and managers of their categories. The Core Solutions Group conducts surveys of Core-Mark’s independent retailers on everything from cleanliness to pricing to schematics, and has completed more than 12,000 in the past three to four years.
Post-survey, the stores’ non-cigarette sales growth is 2.5 times greater than stores that do not get surveyed, said Perkins. “It’s really about harnessing the power of big data,” he said, putting real-time data analytics into the hands of Core-Mark’s territory managers, who can call on stores to help them grow sales profitably.