c-store update...the association for convenience & fuel retailing our 148,126 stores equal more...

C-store Update I’m from Washington DC and I’m here to

help!

August 16, 2012

The Association for Convenience & Fuel Retailing

ABOUT NACS


Founded in 1961 More than 2,200 retail member companies

• Operating more than 50,000 stores in the US • Operating more than 300,000 stores globally • Members in 44 countries • 47 of the 50 largest companies in the industry • Over 70% of our US members operate 10 or fewer stores • Increasingly diverse retail membership

o Delta Sonic Car Wash, Kroger, Publix, Giant Eagle, Follett College Book Stores, TA Travel Centers, Colorado Café Associates, Home Depot, Army and Air Force Exchange Services, Marine Corps Exchange

o Suncor, Quickie Convenience Stores, Topaz Energy Group, SPAR UK, Total, Emirates National Oil Co (ENOC), Pick n Pay, Seicomart, Family Mart|Famima, PetroChina, 7-Eleven Stores Pty. Ltd, JMEL, OXXO, Repsol, Ipiranga, YPF SA

Approximately 1,600 supplier member companies

About NACS


NACS’ three pronged focus

Knowledge State of the Industry (SOI)

Data through CSX Convenience Tracking

Program (CTP) NACS Consulting NACS Research NACS CAFÉ Technology and payment

standards (PCATS) Leadership Executive

Program at Cornell Educational products and

programs NACS Magazine & NACS

Daily NACS Help Desk

Connections The NACS Show SOI Summit THE Tech EVENT. HR Forum NACS Leadership Forum NACS Global Forum & Study

Tours NACS Social Media NACS International

Advocacy Government Relations Media Relations


ABOUT OUR INDUSTRY


Our 148,126 stores equal more than all the other retail channels combined • Over 93,000 of stores are run by single store operators

2011 sales equaled $682 Billion USD We process about 162 million transactions per day 98% of Americans shop at c-stores once/month We sell 82% of the motor fuel sold in the U.S. We employee about 1,900,000 million workers on the retail

side alone We have stores in every congressional district We are the mosaic of America

• Every race, creed, gender, income, age

About our industry


Industry Store Count

Source: Nielsen TDLinx, NACS Research

59,

875

67,

612

78,

395

76,

044

84,

770

84,

574

89,

957

90,

683

89,

567

90,

049

91,

815

93,

209

59,

876

56,

904

54,

029

54,

615

53,

435

56,

081

55,

162

55,

611

55,

308

54,

492

54,

526

54,

917

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Single Stores All Others

119,751 124,516

132,424 130,659

138,205 140,655 145,119 146,294 144,875 144,541 146,341 148,126


112.

0

109.

3

116.

2

132.

1

151.

1

163.

6

168.

5

173.

9

182.

4

190.

4

195.

0

171.

0

181.

3 220.

8 262.

6

344.

2 405.

8

408.

9 450.

2

328.

7 385.

2

486.

9

$0.0

$100.0

$200.0

$300.0

$400.0

$500.0

$600.0

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Dolla

rs in

Bill

ions

Inside Sales Motor Fuels Sales

Industry Sales

Source: NACS State of the Industry Survey of 2011 Data & CSX, LLC.

$681.9 Billion


Same-Firm Sales

Per Store/Per Month 2010 2011 % Change

Total All Sales $390,499 $464,558 19.0%

Fuel Sales $336,014 $427,097 27.1%

Fuel Gallons 124,157 123,710 (0.4)%

Average Selling Price $2.71 $3.45 27.6%

In-Store Sales $125,116 $129,208 3.3%

Foodservice Sales $21,155 $23,431 10.8%

Merchandise Sales $104,979 $107,135 2.1%

Mdse Less Cigarettes $62,400 $63,804 2.3%

Cigarettes $52,546 $52,045 (1.0)%



Same-Firm Gross Profit

Per Store/Per Month 2010 2011 % Change

Total Gross Profit $59,495 $63,411 6.6%

Fuel $20,475 $22,759 11.2%

In-Store $38,317 $39,880 4.1%

Foodservice $11,030 $11,854 7.5%

Merchandise $27,885 $28,660 2.8%

Mdse Less Cigarettes $21,228 $22,158 4.4%

Cigarettes $7,774 $7,571 (2.6)%



In-Store Sales Contribution Average Monthly Sales = $128,187 3.1%

Cigarettes 38.09%, -1.4pts

Foodservice 16.86%, +0.9pts

Pack Bev 14.34%, +0.6pts

Beer 7.27%, +0.1pts

OTP 4.04%, +0.1pts

Salty 3.45%, +0.1pts

Candy 2.75%, flat

Sweet 2.04%, +0.1pts

Milk 1.81%, +0.1pts

Alternative 1.74%, +0.1pts

All Other 7.61%, -0.7pts



In-Store GP Dollar Contribution Average Monthly Margin = $39,880 4.1%

Foodservice 29.37%, +0.9pts

Pack Bev 18.42%, +0.7pts Cigarettes

18.09%, -1.2pts

Beer 4.48%, -0.1pts

Candy 4.44%, -0.1pts

Salty 4.21%, +0.2pts

OTP 4.08%, +0.1pts

Alternative 2.45%, flat

Sweet 2.18%, +0.2pts

Milk 1.40%, -0.3pts

All Other 10.88%, -0.5pts



$3.2

$3.8

$5.4

$6.6

$7.6 $8.4

$7.4

$9.0

$11.1B

$4.0

$5.0 $5.9

$4.8

$3.5

$5.2 $4.8

$6.6 $7.0B

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

$8.0

$9.0

$10.0

$11.0

$12.0

2003 2004 2005 2006 2007 2008 2009 2010 2011

Billi

ons

of D

olla

rs

Card Fees Pretax Profit

Credit Card Fees vs. Pretax Profit


Durbin shaved $90 Million in 2011

Fuel Cost 96%

Transactions 0%

Card Costs 4%

Card Cost Increase Detail


DURBIN SWIPE FEE UPDATE


Most of the Federal Reserve’s rules on debit swipe fees went into effect October 1, 2011

Those rules limit swipe fees on debit purchases made with cards issued by banks with more than $10 billion in assets

The limits on these transactions now are 21 cents plus 0.05% of the transaction amount and a 1 cent fraud prevention adjustment versus the 7-12 cents the Fed research initially proposed

According to the Fed, these limits mean the average fee being charged on covered debit transactions is 24 cents

NACS believes the Fed mishandled the rule and did not follow the law as written. NACS along with NRF, FMI and NRA have sued the Fed over that issue

Durbin update


So does Senator Dick Durbin On May 10th Senator Durbin files a friend of the court brief

• “In its efforts to accommodate the banks, the board’s Final Rule failed in several respects to follow the law. As the plaintiffs have correctly argued, the board’s final rule making exceeded the statutory authority that Congress gave the board,” Durbin argued in the brief.

Congress is now through addressing debit cards – that is up to the Court and the Fed.

Durbin update

Our friend Senator Dick Durbin

In the meantime, VISA and MasterCard announce new “Card Association Fees” putting the Department of Justice on alert…


VISA’s new fees: • A Transaction Integrity Fee (new, post-Durbin) • Revisions to its Network Acquirer Processing Fee (old, slight reduction

of ½ penny per transaction) • A Fixed Acquirer Network Fee (FANF; new, post-Durbin)

MasterCard’s new fees: • Annual License and Registration Fee (new, post-Durbin) • Annual Type III Third Party Processor (TPP) Registration Fee (new, post-

Durbin)

Durbin update


Congress has never taken action on credit card swipe fees which remain too high.

Now we are educating Members of Congress about credit card swipe fees and convincing them that reform is needed.

We must push our message everywhere we can – in the press and directly to the industry – in order to get some relief on the credit card front.

Durbin update


FDA UPDATE


“This act expands bureaucracy,” “The bill will increase taxes on Americans” “It expands the authority of an inefficient agency (FDA)

already struggling with the approval process for, and monitoring of, existing drugs.”

“The Act will distract the FDA from its core mission of approving safe and effective products – a standard unachievable by any tobacco product.”

How the public feels


FDA Inspections/Civil Money Penalties The Tobacco Control Act, signed into law by President Obama

in 2009, contains a number of restrictions intended to limit the sale of tobacco products to minors.

To ensure retailers are complying with these restrictions, FDA has been conducting undercover inspections of retail outlets. These inspections cover: • Prohibition on underage sales • Age verification requirement • Prohibition of free samples of tobacco products • Restrictions regarding gifts/discounted items • Self-service displays • Improper use of Tobacco Brand Names

FDA Update


FDA Inspections/Civil Money Penalties FDA has begun fining retailers who are found to have violated

FDA’s tobacco regulations. There is a fundamental disagreement on the law between

industry and FDA regarding the issue of multiple violations: • FDA appears to have a policy whereby they are permitted to find and

penalize for multiple violations resulting from a single inspection. This could lead to a $10,000 fine and a No-Tobacco-Sale Order resulting from a single inspection.

• NACS maintains that the Tobacco Control Act’s graduated penalty structure—whereby penalties are assessed in increasing increments as multiple violations are discovered over time—not, as a result of one inspection, but rather in the prescribed, gradually increasing manner.

FDA Update


FDA Inspections/Civil Money Penalties Under its broad enforcement authority, the FDA is proposing to

allow the general public to submit a report of a potential retail tobacco violation through a smartphone application, over the Internet, by telephone or by mail.

If a retailer is fined for multiple violations resulting from a single inspection, please contact NACS immediately and consider hiring counsel. After you receive a complaint from the FDA, you have only thirty calendar days to request a hearing.

FDA Update


FDA Regulations and Enforcement Activity Warning Letters and Civil Money

Penalty Complaints Recommendations for Retailers


Non-Face-to-Face Sales FDA is in the early stages of a rulemaking process pertaining to

non-face-to-face sales of tobacco products: • NACS filed comments urging the agency to crack down on tax evasion by

online sellers of cigarettes and to require delivery personnel delivering tobacco products to check the identification not only of the delivery’s recipient, but also whomever purchased the product online. Additionally, we urged FDA to enforce all tobacco regulations—for both brick-and-mortar and online sales—with respect to Tribal sales.

NACS and NYACS recently filed an amicus brief in the District of Columbia urging the court to uphold the PACT Act (regulating online cigarette sales) and allow that law to go into effect. (The case is Gordon v. Holder)

Upcoming FDA Rulemaking


Menthol The FDA has proposed a ban on menthol in tune with the

Tobacco Control Act, which essentially stated that menthol cigarettes have an adverse impact on public health and the removal of menthol would be a benefit. An external peer review panel is evaluating the agency's final review and

the FDA will then publish its final menthol report, open to public comment. There is no deadline date for a final report to be issued by the FDA.

The FDA is currently reviewing the unintended consequences of a menthol ban including higher manufacturing costs to comply with the FDA's requirements, black marketing of menthol products, etc.



Labeling Two lawsuits, two different decisions

• The first lawsuit was filed in 2009 and the U.S. Circuit Court of Appeals ruled in March 2012 that the graphic health warnings are commercial disclosures of important health-related information and, therefore are constitutional.

• The federal district court judge hearing this second lawsuit issued a decision in late February finding that the graphic warning labels were protected commercial speech and violated the U.S. Constitution. This decision was appealed and the U.S. Court of Appeals for the District of Columbia heard the case in April 2012. A decision by the District of Columbia Circuit Court is expected to be issued in the coming months.

The graphic labels are on hold…



Defining “Tobacco Products” In the coming months, we expect FDA to propose a rule

expanding the definition of “cigarette” and “other tobacco product” and thus expanding the universe of products subject to FDA’s sales restrictions: • We anticipate FDA will determine whether e-cigarettes will be regulated

as “cigarettes.” This would make it more difficult for these products to be sold and at a minimum, flavored versions could be banned.

• This summer, the FDA plans to issue proposed regulations covering other tobacco products such as cigars, cigarillos, hookahs and possibly other tobacco products.

• It is possible that this definition could include RYO tobacco in a way that would enhance the regulation of that product and limit the market-distorting impact RYO machines have had.



THE BIG FINISH


NACS can help Marketers create more profitable Dealers

NACS Jobber|Dealer Membership Program • Jobbers become full Retail Members • Dealers become full Retail Members…for a fraction of the

typical membership cost

Petroleum Marketers can differentiate themselves • Provide more benefits and discounts • Provide more information and education

See me or contact me for more information

Let us help you help your Dealers…


• Contact Info Michael Davis VP Member Services [email protected] +1 703 518 4246 888 843 5705

Questions?

mailto:[email protected]

c-store update...the association for convenience & fuel retailing our 148,126 stores equal more...

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