Tobacco Chaos Keeps Casey’s From Optimizing Prices

Regulations shift priorities for implementing chain’s new analytics platform
Photograph: Shutterstock

ANKENY, Iowa — For Casey’s General Stores, emerging regulation around the federal tobacco buying age and government restrictions on flavored vaping products have forced the convenience-store chain to focus its new automation tools on other areas, specifically beer and alcohol, as well as promotions forecasting, officials said during their March 10 earnings call.

Ankeny, Iowa-based Casey's, which has 2,181 stores located in mostly rural markets, had been rolling out a price optimization platform in the past months, said Darren Rebelez, president and CEO. While the data has been limited, Rebelez said Casey's has seen “signs of margin expansion” in areas where it has implemented the technology. The company has completed its rollout of the platform with its beer and alcohol categories, he said, and is working on integrating promotion forecasting into the system.

That margin expansion has come while stores have also been able to improve sales within the grocery and general merchandise categories, said Bill Walljasper, senior vice president and chief financial officer of Casey’s.

Two of the major regulatory changes that have occurred in recent months both came from the federal government. In December, the legal age to purchase tobacco products rose from 18 to 21, while in early January, the U.S. Food and Drug Administration released a new guidance, asking retailers to remove flavored vaping cartridges from shelves as of Feb. 6, 2020.

In terms of the overall tobacco category, Rebelez described it as being “soft.” Cigarettes have been “a little softer,” but not as much as to be expected given the increase in the legal buying age. Vaping, he said, has “softened a little bit, but it's still growing. So just growing at a slower rate than it was previously.”

In terms of tobacco margins, Rebelez said, “It’s blending out about the same but has definitely softened.”

Rebelez also noted a “shift” to smokeless items.

Casey’s ranked No. 4 in CSP’s Top 40 update of its Top 202 convenience chains by store count. A fully updated Top 202 list will appear in the June 2020 issue of CSP magazine.

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