The Industry’s Power 25 (part 2)

Robert Myers
President and CEO
Casey’s General Stores Inc.

About 40 years and 1,470 stores later, Casey’s General Stores still prefers those small Midwestern towns. If not for the small-town charm they offer, then at least for the collective $4.8 billion they generated this past year to make Casey’s a leader in the world of convenience.

The past 12 months have been a challenge for convenience stores nationwide, and Casey’s was no different. Operating in nine states, the chain has been challenged to improve fuel margins, fight credit card fees and handle unpredictable shifts in consumer spending.

But what has made Casey’s General Stores stand out is its ability to respond to these pressures and come out on top. The company takes a two-prong approach to protecting its bottom line: Improve gross profit and control expenses. On the latter, Casey’s CEO Robert Myers was more than willing to scale back on any lock-tight plans for acquisitions or growth this past year, adding just five stores as opposed to the 50 it added in 2007.

About 75% of Casey’s gross profits are generated from in-store purchases, but the bulk of its sales are at the pump. To maintain its fuel customers and ultimately drive in-store purchases, Myers said Casey’s has committed to a pricing strategy that competes with other c-stores in its market, even if means increased volatility on gas margins.

It’s a strategy that is paying off. In-store sales over the past year increased more than 11% as the chain saw outstanding performance in grocery and merchandise, prepared food and fountain drinks.

Casey also rolled out an ambitious design for new stores, which includes an additional 1,000 square feet: 500 square feet for cooler space and 500 square feet to expand foodservice, fountain drinks, the coffee bar and seating areas in some stores.

Myers, who has been with Casey’s since 1989 and became president and CEO in June 2006, said the chain focuses primarily on acquisitions to grow because it’s more cost-effective.

Richard Oneslager
President and CEO
Balmar Petroleum and 2007-08 Chairman of the National Association of Convenience Stores (NACS)

Richard Oneslager, president and CEO of Denver-based Balmar Petroleum left his mark on the industry through his relentless pursuit of fairness for all convenience store and petroleum operators as the 2007-08 chairman of the National Association of Convenience Stores (NACS).

"Honestly, advocacy was never one of my passions," Oneslager confessed during his NACS Show Opening General Session address. "But advocacy is one of my passions today, and for one simple reason: Credit card fees are destroying our industry."

In 2007, NACS reported the industry paid $7.6 billion in credit card fees. During the same period, the industry’s pretax profits dropped by $1.4 billion to $3.4 billion; meaning the industry pays more than double its pretax profits to the credit card industry.

Oneslager’s work with NACS helped push the Credit Card Fair Fee Act, which passed the House Judiciary Committee in July. Among other provisions, the bill allows retailers to band together to negotiate lower rates with credit card providers and banks. "Now that Congress and the public are learning how credit card fees are driving up the price of gas, food and other necessities, the big credit card companies are in for a very rough ride," he said.

Despite challenges over low gas margins and high credit card fees, Oneslager said that the convenience and petroleum industry is poised for continued success because it delivers what consumers want. "We offer them convenience. We save them time. We simplify their lives. We offer them comfort," he said. "That is why we are well positioned, in good times and bad."

Two areas, in particular, present retailers with opportunity. "Foodservice, when executed well, can help many retailers make up for poor motor fuel margins and redefine why people come to our stores," Oneslager said. And there is a growing importance of what he called the "refreshment shopping occasion." Today, nearly 40% of the industry’s gross margin dollars come from beverages—packaged beverages, beer, dispensed beverages and coffee, in particular.

Stan Sheetz
President and CEO
Sheetz Inc.

Sheetz Inc. has long since solidified its place near the top of the convenience totem pole, and 2008 was unquestionably another enviable year for the chain.

Led by Stan Sheetz as president and CEO, the Altoona, Pa.-based chain turned the past 12 months into another exemplary performance chockfull of innovation, trend-setting and steadfast commitment to seemingly flawless customer service, namely through its Total Customer Satisfaction (TCS) program.

Among the watermarks for Sheetz these past 12 months was the summer grand opening of the $46 million Sheetz Bros. Kitchen, a 140,000-square-foot facility that lets Sheetz maintain total control of its foodservice products and programs.

The impetus for the kitchen was twofold: It streamlines foodservice tasks that had previously been assigned to store-level employees, namely so those employees can focus on customer service. Additionally, the kitchen’s massive bakery erases any barriers to innovation, opening the floodgates of creativity as Sheetz sets out to create its own donuts, parfaits, sandwiches, rolls, breads, and other items made fresh daily with consistent quality.

"An expanded fresh food menu is something we are excited to be able to offer our customers," Sheetz said. "Sheetz Bros. Kitchen has allowed us to try and give people new options when they want something good on the go."

Sheetz has a lock-tight grip on foodservice excellence through its Made To Order (MTO) menu, but it has also supplemented that program with a Made-To-Go (MTgo!) lineup featuring ready-made, grab-and-go items such as sandwiches, salads, parfaits and more for customers who want to avoid the minutes-long wait for a MTO item. The MTgo! items, too, will be made in the new Sheetz Bros. Kitchen.

Sheetz ushered in its 350th store this past summer and continued its growth in Ohio, Pennsylvania, West Virginia, Virginia, Maryland and North Carolina. The chain is fast approaching the $5-billion mark and was ranked 82nd among Forbes magazine’s Top 100 private companies in the U.S.

Pete Sodini
President and CEO
The Pantry Inc.

Given the economic turbulence of the past 12 months, The Pantry has proven that it’s able to withstand the most unforgiving of markets, even when it means putting its expansion plans on hold.

In 2006 and 2007, the Sanford, N.C.-based convenience chain was in the thick of a relentless growth schedule, acquiring dozens of c-stores throughout the Southeast, including the $275 million purchase of 66 Petro Express stores in North and South Carolina. More than 80% of its stores operate under the Kangaroo Express banner.

In 2006, The Pantry added 93 stores to its mix, while in 2007 it added more than 150 stores. At the end of 2007, The Pantry had 1,644 stores. At the end of 2008, the chain had 1,653 stores—an increase of nine units in the last 12 months. But the past year wasn’t about acquisitions for The Pantry. It was about cutting costs, improving performance and optimizing existing operations.

Pete Sodini, who has led the company since 1996, announced the chain was pausing acquisition plans until 2009. Citing soft consumer spending, high gas prices and other factors, Sodini cut $20 million out of the chain’s capital expense plans, reducing it to $90 million from $110 million.

In its most recent earnings reports, Sodini’s news was upbeat: Revenue for the year was $9 billion—up a healthy 30% from $6.9 billion in 2007—while net income was $31.8 million, up nearly 19% from the $26.7 million in 2007.

The company’s aggressive cost-cutting actions—paired with improved margins on fuel sales and capital spending reductions—have ultimately positioned the company to resume its "tuck-in" acquisition strategy in 2009, Sodini said.

Additionally, the chain is looking to grow its foodservice co-brands—Subway in particular—in various markets. Former Pilot Travel Center executive Brandon Frampton has been hired to head up this endeavor as The Pantry’s vice president of foodservice.

Howard Stoeckel
President and CEO
Wawa Inc.

The convenience industry has come to recognize that it takes a lot more than a turnkey hot dog grill or a fried chicken stand to lure today’s hungry customers. It takes innovation, value and commitment to quality.

Pennsylvania-based Wawa Inc., however, has known this for some time. For years the company has offered proprietary made-to-order hot and cold meals for customers at more than 570 Wawa stores throughout New Jersey, Pennsylvania, Delaware, Maryland and Virginia.

The chain’s foodservice program has consistently been lauded for its originality and value. CEO Howard Stoeckel, who took the top spot in 2004 as the first non-family employee to head the company, has been ramping up the dinner menu and rolling out promotions and innovative programs to bolster sales for all three dayparts.

Stoeckel said earlier this year that Wawa is nurturing a "dinner mentality," and one of his first steps in this endeavor was a March-to-July promotion that showcased made-to-order hot meals at $3.99 each or three items for $9.99.

With approximately $5 billion in annual sales, Wawa is showing that convenience, innovation and ingenuity reign supreme. It plans to continue focusing on its core market, growing by about 10 to 12 stores next year and putting creativity at the top of its agenda.

"We have a 200-year history that includes a multitude of changes," Stoeckel said. "We’ve manufactured everything from cannonballs to baby diapers. We’ve survived because we embrace change. About a decade ago, we evolved again and added gas pumps. We will continue to innovate and change, but hold onto the values that guide all of our decisions: value people, delight customers, embrace change, do things right, do the right thing and have a passion for winning."

Wawa employees, too, remain the backbone of the company. "Our goal is to create the Cheers of convenience stores," Stoeckel said. "Our associates greet you by name. They’re active in the community. This builds a powerful reservoir of trust and loyalty with customers."

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