Top 202: The Big Breakdown

Top 202 c-store chains

To draw meaning from the raw rankings, CSP and Technomic broke the Top 202 down to groupings based on unit count. The goal was to amass and dissect public and proprietary statistics about these companies to find clear commonalities, create composite profiles and benchmark types of operations, while also pointing out differentiators within.

The results: five groupings, or “clusters,” based on store count:

  1. THE GREAT UNKNOWNS (50 stores or fewer)
  2. LOCAL LEADERS (51-300 stores)
  3. THE REGIONALS (301-700 stores)
  4. THEY MIGHT BE GIANTS (701-3,000 stores)
  5. GLOBAL BRANDS (3,001 stores or more)

Foodservice data from Technomic allowed editors to examine the list via one of the channel’s highest-margin and fastest-growing categories. The analysis of foodservice sales per store (unit) and foodservice sales per square foot resulted in two additional cluster segments, HUNGRY TRAVELERS and TASTE OF MONEY.

The largest number of chains fell into the two lowest-ranked clusters, with 85 chains (42%) having 50 stores or fewer and 88 (44%) in the 51- to 300-store range. In other words, a whopping 86% of chains on the overall list fell in the one- to 300-store range.

The number of chains within each remaining cluster gets smaller as you travel up the ranks. The 301-to-700 grouping includes 16 companies, making up 8% of the Top 202, while 11 chains are in the range of 701 to 3,000, at 5%. (Speedway parent Marathon Petroleum Corp., Enon, Ohio, soars above the rest of its cluster with 2,770 stores.)

The top two chains, 7-Eleven and Couche-Tard, alone make up the Global Brands cluster. They represent 1% of the 202 companies on the list but account for 32% of stores represented, or 15,535 stores out of 48,258.

Any exercise in ranking naturally includes a look at who climbed up or fell down, but interpreting growth by store count can be tricky. Couche-Tard’s purchase of 1,277-store CST and one other smaller acquisition (counted in this year’s Top 202 because of significance despite the deals not closing in 2016) represented the largest number of stores to change hands last year; however, it represented only a 21% increase in unit growth for the already massive consolidator.

The chain that achieved the greatest percentage of growth was El Paso, Texas-based Western Refining. The firm purchased Northern Tier’s refining and marketing assets, essentially doubling its retail base to 543 locations. (That retail changeover will continue; San Antonio-based refiner-marketer Tesoro purchased Western Refining in a deal yet to close.) Similarly, Wallis Oil, Cuba, Mo., almost doubled its store count with the acquisition of retail assets from U-Gas, Fenton, Mo., bringing its store count to 66. Western jumped from No. 37 last year to No. 16, while Wallis enters the ranking this year at No. 90.

Multiple dynamics factor into whether companies grow, stay put or sell out, says David Bishop, managing partner of consultancy Balvor LLC, Barrington, Ill. Access to capital, supply-chain logistics and the chain’s cultural composition all drive growth—or lack thereof.

1. The Great Unknowns

Rotten Robbies convenience store

Any good countdown begins at the bottom, and while CSP’s annual ranking traditionally starts at No. 1, the expansion to 202 chains begs for a flip-flop.

The 50-or-fewer group makes up 42% of the Top 202 at 85 chains. More than half (64%) have 40 or fewer locations, with the smallest chains netting 31 stores. Just more than half (54%) of the stores in this cluster average 2,000 square feet or less, but 45% make $60 to $90 in food and beverage sales per square foot.

Comparatively, 25% of the remaining 202 companies have a higher return, at $90 to $150 per square foot, while restaurant averages, according to Technomic’s DRL, can range from a McDonald’s unit at $156 per square foot to a Wendy’s location at $270.

As a group, The Great Unknowns had the lowest store-count increase from 2015 to 2016 at 1.4%. By comparison, chains in the highest tiers averaged 7% to 9% growth.

Chains in this range typically have fewer internal resources and less access to capital compared to larger players, but they still feel the pressure to compete with larger regional and national chains.

As a result, this group has a strong penchant for innovation and creativity, having to do more with less, says Joseph Bona, president of MoseleyBona Retail, a store-design consultancy based in Franklin, Mass. Free of concerns over scalability or outsider influence, these players can stay more nimble. “That’s why we see more innovation from guys who are smaller,” Bona says. “If they’re well-run companies and they’ve got cash, they’ll invest it back in their business because they don’t have shareholders to respond to.”

Historically speaking, a good chunk (42%) of the 50-or-less chains have oil-company or jobber (fuel wholesaler) roots, meaning that while many operate smaller, legacy locations, they’re probably on strong corner spots in collar suburbs of major metro areas.

Most c-stores and gas stations within big-city limits were traditionally major-oil direct-ops,

which the majors sold for the most part through the late 1990s and 2000s. Many area jobbers scooped up that booty and jumped into the ranks of 100 or more stores.

Though the 50-and-under group was not able to capitalize on that movement, they’re still firmly entrenched in well-established bedroom suburbs.

This cluster’s marketing focus and strong locations likely make for a formidable barrier to entry in these suburban markets, Bona says. “For anyone who wants to go into [these established] markets, I wish you luck,” he says. “They have a single-minded focus, keep their eye on the ball and put everything they have into their business—because at that size, they wouldn’t be successful if they didn’t.”

Next: Local Leaders

2. Local Leaders

Ricker's convenience store

E-Z Mart, QuickChek, Ricker’s, Royal Farms, Rutter’s, Thorntons, Weigel’s: Chains in the 51- to 300-unit range are our industry’s Local Leaders. They exemplify the regionality of the c-store channel in even tighter concentrations than The Regionals cluster (stores in the 301-700 range).

This grouping is still populated by industry standouts, but while many big, recognizable names fall in this cluster, they are less well known outside their immediate market areas than those in the higher tiers.

These chains represent a total of 88 convenience-store chains, the biggest cluster in number of companies. It grew 3.9% vs. 2015 in unit count for a total of 9,323 stores. That growth is below the average for all Top 202 chains. (Each tier in this year’s ranking saw a declining percentage in unit change than the one above it.)

Store losses become more common among these chains. Global Partners, an up-and-comer in terms of growth by acquisition, nevertheless declined by 30 units through sale-leasebacks and sales of noncore assets.

Acquisition leaders in this tier included Anabi Oil, which gained 75 units; Nouria Energy, with 33; Wallis Cos., 30; and Mirabito Energy, 26. Notable foodservice initiatives include Thorntons’ Real Kitchen in its new food-forward c-stores, and Giant Eagle Convenience Division’s new GetGo Cafe + Market fresh menu.

Next: The Regionals

3. The Regionals

Kum and Go convenience store

The next cluster in this year’s Top 202, The Regionals, consists of 16 companies that are mostly indistinguishable from the upcoming They Might Be Giants grouping except in number of units.

These chains, representing 6,823 convenience stores, grew 7% in unit count over 2015, roughly the average for all Top 202 chains. It saw the third-greatest unit change of the groups, after 7-Eleven and Couche-Tard and the second-tier companies. But it is also in this group that small-unit declines start to manifest themselves, with Cumberland Farms losing the most (six stores).

A major point of difference for these chains is their tendency to be more concentrated regionally rather than superregionally or virtually national, as in the top two clusters. Kwik Trip in the upper Midwest, Sheetz in the East, Kum & Go in the Midwest, Stewart’s Shops  in upstate New York and Maverik in the West are solidly and successfully entrenched in their respective regions and show no signs of major market-hopping, despite unit growth.

Exceptions include two big truckstop chains, TravelCenters of America and Love’s Travel Stops & Country Stores, which have broader interstate-based retail networks. At 487 units, TA has been on an acquisition spree in the past few years in several markets to expand its Minit Mart convenience-store chain, even rebranding the stores at its travel centers to the Minit Mart flag.

Western Refining’s acquisition of Northern Tier Energy brought 282 more stores to its portfolio and solidified its footprint in two concentrated regions: one in the Southwest and one in the upper Midwest. (Tesoro is in the process of acquiring Western Refining.)

And New England-focused Cumberland Farms, like RaceTrac, has stores in noncontiguous markets such as Florida.

Sheetz is the foodservice standout, pioneering kiosk ordering, made-to-order food prep and a brand image that has helped the chain generate an extremely loyal following.

Another food-focused Regionals player, Kum & Go, has launched the Go Fresh Market concept in its newly built c-stores, offering an enhanced foodservice experience with an open-kitchen layout.

A big change in this tier comes with Compania de Petroleos de Chile’s (COPEC) acquisition of Mapco Express and other c-stores from Delek U.S. Holdings Inc. in November 2016. The new CEO, Andy Scoggins, joined Mapco in 2014 from Ruby Tuesday, where he was vice president of culinary and beverage. The move could bring a new level of food-forward culture to the c-store network Scoggins now leads.

Next: They Might Be Giants

4. They Might Be Giants

Stripes convenience store

There may be a massive drop in store count from the top tier to this second grouping, but the 701- to 3,000-store-count range has seen notable growth, nipping on the heels of the nearly national chains. These players might be giants someday; thus the cluster title.

The tier represents 13,239 convenience stores and grew 7.8% in terms of units last year. That’s more than the average of 6.8% and the most of any single cluster besides the one occupied solely by the two c-store leaders.

These 11 companies are not national in scope but tend to be superregionals, often spanning greater geographies, such as GPM Investments, Marathon Petroleum and Sunoco LP; offering interstate locations, such as Pilot Flying J; or operating in noncontiguous markets, such as Wawa.

Major acquirers or consolidators include GPM and Sunoco. GPM has swallowed up Admiral Petroleum, Road Ranger c-stores, Gas-Mart USA, Apple Markets, VPS Midwest and One Stops. It gained 280 stores from 2015 to 2016. Sunoco likewise has amassed a stable of store brands, including APlus, Stripes, Aloha Island Mart and Tigermarket. It gained 440 stores year over year in 2016.

As we enter 2017, industry consolidation shows little sign of abating, and some of these companies will only get bigger, knocking on the doors of 7-Eleven and Couche-Tard as they grow. But this group is also home to Casey’s General Stores, which exemplifies organic growth and sidestepped its own acquisition by Couche-Tard in 2010.

This group also reflects the oil-company roots of the c-store industry. Marathon, Sunoco, BP America and Chevron are the remnants of the petroleum businesses that expanded with the 20th-century automobile and interstate culture. That era has receded, causing the majors to divest their retail networks.

Diverse in its roots and strengths, this grouping is also a standout for foodservice, with Wawa and QuikTrip exemplifying the potential of foodservice in a big chain. Wawa in recent years has expanded on its hoagie base with trend-forward menu platforms, while QuikTrip has been rolling out its QT Kitchens made-to-order concept with new stores.

Consumers have ranked these two chains among the best in the industry for their consistency of execution, customer service, value, atmosphere and attention to portion size and healthy options, according to Technomic’s Consumer Brand Metrics.

Of course, Casey’s has made a name for itself in pizza, evolving its legacy in recent years with online ordering and delivery.

Next: Global Brands

5. Global Brands

Circle K convenience store

Were its closest competitor a riding lawnmower, the Global Brands cluster—consisting of the world’s two top convenience chains—is a bulldozer.

7-Eleven Inc. and Alimentation Couche-Tard make up this cluster, with attributes including sheer breadth of scale, brand names that have long defined “convenience store” and the almost generic quality of its retail offer. Without a doubt, these are the industry giants, highly valued by vendors and boasting well-known, instore brands that readily roll off consumers’ lips.

With operations in more than half of the states across the country, this pair is all alone at the top in store count by thousands of stores. The two remain neck and neck in U.S. unit count, with both outlining a growth strategy to acquire even more U.S. units.

Their foodservice programs aren’t exactly signature, even though the two make considerable bank on the category. Both have private-label prepackaged foods and dispensed beverages, with significant revenue (and rivalry) between 7-Eleven’s Big Gulp and Circle K’s Polar Pop. Together, the Global Brands cluster represents 32% of the total stores in the Top 202, but neither has a market share of more than about 20% across the U.S. convenience industry.

Only in the past couple of years has Couche-Tard been razing old Circle K sites and rebuilding much larger stores. Through acquisition of The Pantry in 2015 and CST Brands in 2016, it raised its average store size with newer Kangaroo Express sites and new-to-industry Corner Stores.

While 7-Eleven is a grandfather in the industry, starting as an ice house in  1927, Couche-Tard was nearly unknown when it acquired Circle K from ConocoPhillips in 2003. Both operate in a worldwide arena, and both are sharply focused and highly successful at retail expansion and building shareholder value.

And when it comes to street corner locations, nobody does it better. That strategy of acquiring well-placed locations that deepen an existing market penetration alone helps the Global Brands sustain and grow revenue as they grow in store count.

A key difference for these two is that Couche-Tard largely owns and operates its stores, while 7-Eleven maintains a franchise strategy. Given a perfect world, 7-Eleven has said it would franchise all of its units.

When the Global Brands make acquisitions, the goal usually is to increase market penetration, strengthen their vast buying power and trim overhead, especially general and administrative expenses. That’s the likely scenario as Couche-Tard absorbs CST Brands and Corner Store outlets.

But CST has more than a strong footprint, and what remains to be seen is whether Couche-Tard will make this latest acquisition one of foodservice smarts.