Preparing for Industry Challenges

Steve Loehr

Steve Loehr

Steve Loehr, vice president of operations support for Kwik Trip and the current NACS vice chairman and treasurer, shares his insights on the issues affecting convenience retailers.

By John Lofstock, Editor.

The convenience store industry continues to evolve, becoming a bigger part of the American consumers’ daily lives. In 2012, the industry achieved record sales of $700.3 billion, according to the 2013 NACS State of the Industry report.

But there is still a lot of work to be done. Issues such as swipe fees, tobacco regulations, healthcare and menu labeling threaten the industry’s profitability at a time when margins are already squeezed and competition remains at an all-time high.

Still, convenience stores are an important part of the economy. The industry employed 1.84 million people in 2012 and generated $171 billion in federal, state and local taxes in 2012. That could all change as Obamacare takes hold.

Steve Loehr has seen the industry evolve for more than two decades. He is the vice president of operations support for Kwik Trip Inc., which operates more than 400 Kwik Trip and Kwik Star convenience stores throughout three states.  As the NACS treasurer, Loehr is responsible for overseeing the association’s financial plan. He has most recently served as NACS vice chairman of government relations.
Prior to joining Kwik Trip 23 years ago, Loehr, one of the most respected men in the industry with a lengthy career in leadership positions to match, owned and operated a supermarket in the 1980s and worked for Gateway Foods of Pennsylvania, serving four years as its president. He is active in a number of industry groups, serving on the boards of the Wisconsin Petroleum Marketers & Convenience Store Association and Wisconsin Grocers Association.

Loehr sat down with Convenience Store Decisions to discuss the issues facing convenience store and petroleum marketers in the year ahead.

CSD: What do you see as the main issues facing the industry today?
SL: There are several key issues affecting convenience stores, including menu labeling, interchange fees, E-15 and alternative fuels, Obamacare and the Supplemental Nutrition Assistance Program (SNAP). SNAP has been under the radar, but earlier this year, the Senate modified this language to grant the U.S. Department of Agriculture substantial leeway to deny retailers the ability to participate in SNAP based on a variety of factors. Prohibiting convenience stores from accepting SNAP benefits will negatively affect not only retailers but their customers and communities.

CSD: How do you see NACS addressing those concerns?
SL: NACS is leading the charge on all of these issues, as well as many others. The NACS staff meets nearly every day with legislators and their staffs, as well as regulators, to make sure they understand our industry’s stand and concern on these issues.

CSD: Where do we stand in the fight against swipe fees?
SL: Once, again, NACS is leading the charge on exorbitant interchange fees. We keep reminding everyone that the fees we pay are the highest in the industrial world. NACS was a leader in putting together a strong coalition of retailers, including Walmart, Target and Best Buy, to fight this issue. While we are still awaiting the judge’s decision to accept or deny the settlement, NACS is fully prepared to appeal if the judge decides to accept the settlement.

On another related issue, NACS also led the charge to sue the Federal Reserve because of the rate they placed on debit charges as a result of the Durbin bill. The Fed’s fee was 10 cents higher than it should have been and NACS sued and won. While the Fed has appealed, watch for good news from this action in the future.

CSD: How important is retailer advocacy for NACS? What kind of a difference can retailers make at the local, state and federal levels?
SL: As lawmakers continue to legislate laws that are harmful to our industry, and regulators do the same, NACS has to be even more vigilant. I think advocacy will be one of the most important things NACS provides  for our industry going forward and everyone should be involved.

CSD: The Affordable Healthcare Act (Obamacare) is causing quite a bit of confusion in the marketplace right now. What is the long-term impact this legislation could have on convenience store retailers?
SL: All one needs to do is read the newspaper every day to see the negative impact Obamacare is having not only on our industry, but our country as a whole. There is no doubt our employees will pay more for less coverage. While Obamacare certainly is the law of the land, we can only hope that future legislation can lessen the long-term ramifications of it.

CSD: Fuel prices have been fluctuating wildly over the past year. What are your thoughts on current fuel prices and how should retailers communicate the cause of these higher prices to their customers, many of whom are already price sensitive?
SL: NACS has done a great job educating the media on the complexities of fuel pricing. One rarely sees “price gouging” raised in news articles today. This is a direct result of NACS talking to the media.

CSD: Convenience store retailers currently sell 80% of the country’s motor fuels, but the fuel industry is changing. What is the next step for industry retailers? Should they be investing in renewable fuels, electric charging stations, etc.?
SL: Our industry has to remain flexible to be able to sell liquid fuels as they become legal and viable to sell. We also need to be on the leading edge for new fuels such as LNG and CNG. Kwik Trip is investing heavily in this area. We have opened 20 sites this year and hope to have 100 within four years.
The new NACS Fuels Institute will play a major role in new fuels by instituting studies with all major stakeholders to help educate our industry on fuels for the future.

CSD: Now that the FDA has control of tobacco they are trying to position themselves as a “partner” with convenience store retailers. How would you rate this partnership to date?
SL: The FDA is definitely working hard to get its hands around tobacco. While I believe it is working hard to partner with our industry, NACS is working hard to ensure new regulations are fair, whether it be graphic images on cigarette packs, the availability of menthol, etc.

CSD: What does the future hold for electronic cigarettes? Do you think the FDA will look to regulate these products like traditional cigarettes?
SL: Electronic cigarettes certainly are generating a buzz in our industry today. All the big players are getting into e-cigs. I believe the FDA will heavily regulate this product and I believe most states will heavily tax them, too. Only the future will tell how big their market share may be.

CSD: Can you discuss the role suppliers and manufacturers play in today’s convenience store industry and how the retailer-supplier relationship has evolved over the past few years?
SL: Suppliers and manufacturers play a crucial role in the success of our industry and are more important than ever. Our industry is evolving quickly and major changes are happening overnight, it seems. Both the supplier and manufacturing communities  have to have their ears to the ground and listen to operators. They have to find ways to get new products to our markets faster, develop more efficient and less costly delivery options, and develop more healthy food options and packaging options for our channel of trade.

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