Merchandising By Design, Inc. , 2633 Elmbrook Dr., Carrollton, Texas 75010

Phone (214)-883-5013 * Fax (972)307-3180 * merchandisingbydesigninc.com

K E Y T R E N D S :

C H A N N E L B L U R R I N G

D I V E R G I N G F O O T P R I N T S & S T O R E D E S I G N S

“ W H A T ’ S U P ” : G R O W I N G C A T E G O R I E S

K E Y S T R A T E G I E S :

H E A L T H & W E L L N E S S - F R E S H F O O D M O R E C O N V E N I E N C E - F O O D S E R V I C E

H I G H D E M A N D / H I G H D E S T I N A T I O N - B E E R C A V E S

“The future will require owners to offset

declines with new category opportunities and

merchandising strategies”

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WHO IS PLAYING IN YOUR SANDBOX?

99 Cents Only Stores

“More Booze on Dollar

Store Shelves”

“We want to be a

convenience store”

CHANNEL SHIFTS

1. Critical Driver (solve a problem)

2. Speed & Convenience

3. Self Expression

4. Thrill of the Hunt

5. Low-Cost Replenishment

(heading for extinction)

6. Endless Aisles

SHOPPING MODES & CHANNEL BLURRING

Limited

Asst. Drug

Store

Dollar

C-Store

Traditional

Price

Impact

Small

Grocery

Club

Fresh

3 -10 – 8- 5+

E-Commerce

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WHAT WE KNOW….

• 93% of retailers say labor is getting more expensive

• 83.4% cost of construction materials has increased

• 71.7% cost of construction labor has increased

• Use of “green materials” important to100% (responding) (LEED

only 8%)

• LED now used by over 100% of retailers (83% all retailers polled)

• Retail expansion is edging up…

• Wait…………..WHAT?

Chain Store Age SPECS 2012

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SUPERMARKETS GLOBAL SHIFT TO SMALLER STORES

• In both urban and rural areas

• Across all channels (electronics, home stores, food stores, etc.)

• Fresh focused

• Flexible

• Select assortments; differ by city

• Faster development

• Many more available sites

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C-STORES SHIFT TO LARGER STORES

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NOCO Express State-of-the-art C-Store

Demolished 1530 SF to build 6300 SF to accommodate the needs of its customers

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12

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Caltex FreshStop Named International

Convenience Retailer of 2013 9/25/2013 Insight NACS Convenience Retail Awards

The convenience and fuel retailer was recognized

for its new approach to convenience retailing at its

Airport City store located near Cape Town

International Airport.

Page Content

South African-based convenience and fuel retailer

was recognized for its new approach to

convenience retailing at its Airport City store located

near Cape Town International Airport in South Africa.

The two-story FreshStop store caters to travelers and

commuters alike, offering a wide range of products :

full kitchen and bakery

large seating area

free Wi-Fi

car wash & car repair

valet services

boardroom and meeting room facilities for

business travelers

ANACHRONISTIC DESIGNS

Casualty of the recession is “schmaltzy” architecture

Move away from dramatic looks/lighting

Eliminate contrived, fake, illusions and tchotchkes

Millennials and boomers like pure, clean, regional designs

Nothing extraneous, eliminate costs of “stuff”,

redeploy capital where it really influences!

Migrating from green to lean

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CUSTOMER POLL

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FORGET THE

FRILLS

SIMPLE TO SHOP

ACTIVATE THE SPACE

RIGHT INVESTMENTS

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SHIFT HAPPENS

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DECLINING SALES CATEGORIES EAT INTO PROFIT POTENTIAL

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% Change 2012 vs. 2008 (Dollar & Unit Sales)- Growth Categories

Category Dollar Sales

Unit Sales

Avg Price Change vs.

2008

Energy Drinks 56.4% 56.4% 2.1%

Cigars 38.1% 30.6% 5.7%

Smokeless Tobacco 34.3% 31.2% 2.4%

Chocolate Candy 27.8% 1.5% 19.8%

Salty Snacks 22.2% 3.1% 21.6%

Cigarettes 18.5% -2.8% 34.6%

Sports Drinks 16.4% 14.9% 1.4%

Beer/Ale/Alcoholic Cider 9.1% 3.5% 10.5%

Bottled Water 2.9% -3.1% -3.3%

Carbonated Beverages 0.4% -1.2% 13.0%

Top 50 C-Store Categories 17.0% 4.8%

*Source: IRI AllScan

COMPARING GAS PRICES? THERE'S AN APP FOR THAT

• Get a GasBuddy App for your Phone!

Find the cheapest gas on the go – for

free!

• Locate gas stations near you and see

their current gas prices.

• For every gas price reported, you’ll earn

points towards our prize give-away.

• GasBuddy is a community of users

working together to update gas prices.

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KEY GROWTH CATEGORIES

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% Change in Sales ($)

Category C-Store/Gas All Retail Outlets

(incl. C-Store/Gas)

Yogurt 57% 10%

Soft Drinks (Non-Carbonated) 50% 6%

Fresh Produce 38% 5%

Tea 24% 10%

Pizza/Snacks- Frozen 22% 0%

Juices & Drinks- Refrigerated 18% -1%

Medications/Remedies 18% 3%

Dressing/Salad/Prepared Food- Deli 18% 4%

Diet Aids 17% -5%

Packaged Milks & Modifiers 17% 7% *% change in dollar sales during the 52-week period ending 8/4/12 per Nielsen Research

Prepared foods

Ref. meals

Beverages

Produce

Dairy

Health/wellness

Beer

BY 2015 TRADITIONAL GROCERY MARKET SHARE -3.0%

Expected Annual Growth

Traditional Grocery -3.0% Traditional Supermarket -1.4%

Limited Assortment 12.5%

Fresh Format 9.4% Supercenters 5.9% Drug 3.4%

Dollar and Wholesale 2.2%

C-Stores 2.4% Wholesale/Club 4.0%

Mass -7.0%

The Future Of Food Retailing Report

28% growth by 2017

HISTORICAL FOCUS

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What type of restaurant brand concept would you like to

see available at convenience stores? % Fast food sandwich 31%

Coffeehouse/Donut shop 31%

Fast food burger 27%

Fast food pizza 26%

Fast food chicken 26%

Bakery/Café fast casual 23%

Better burger fast casual 23%

*Source: Mintel

ENGAGING WITH MILLENNIALS

• Consider them Gen Frugal

• They have GREAT filters (see what

they want to see)

• Brand is not important, will only

engage in what they care about

• They do not respond to marketing

• They have a trusted board of

advisors- it’s the universe!

• They are tech-dependent (way past

savvy)-digital natives

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More than 50% of C-Store

shoppers are younger

than 39

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“The fly-wheel affect we have created across Starbucks Rewards loyalty card, our mobile app, adjacent extension of our core

brand beyond coffee ….. And continually enhancing our store

environment (wireless charging and Wi-Fi) ……..365 days a year.

Howard Schultz, CEO Starbucks

Consumers can buy anything, at anytime,

anywhere, and on any device.

Food is everywhere, prepared and delivered

when, where, and how you want it.

Competitive Edge, WB 8/2013

Unfortunately, this new, highly competitive landscape has left most

retailers with technology, personnel, and an organization designed for

the past not the future.

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BUILDING FOR BOOMERS

• 80 million of strong spending power

• “Digital immigrants” – embrace technology

• Perceive themselves as 10 years younger

• Prefer an emotional connection

• They pull away from noisy, busy, cluttered stores

• They would love store lighting to be improved

PepsiCo’s Center Human for Human Understanding

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Experience

&

Convenience

The #1 And #2

Reasons Why

Consumers

Remain Loyal To A

Particular Retail

Brand

Convenience Re-Defined

I don’t want it fast....

I want it NOW...

HEALTH & WELLNESS BEYOND LIFESTYLE TO WHOLE LIVING

• Transparency-trust-authentic

• Artisan, hand crafted & sustainable

• Town center/near hubs (back to Main Street)

• Local history, local products, local architecture

api (+) store design

& architects

ALL STAR FOOD TRENDS

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Hand held/cup holder foods

Beyond donuts – artisan foods

Ethnic varieties

Family friendly foods and sizes

IRI Times & Trends

ALL-STAR FOOD TRENDS

• Demanding transparency in production, handling, business practices, local &authentic

• Service and self-service balance

• Women are big spenders-outspending men by $14.31 per trip to supercenters and $10.32 per trip in grocery stores; will control 2/3 of consumer wealth in next decade

• Customers want “ME” commerce,

customized and individualized

api (+) store design & architects

Prepared foods purchases from all channels outpaces restaurant visits SN, July 2013

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U.S. WOMEN CONTROL THE PURSE STRINGS

AND THEY DON’T FREQUENT DUDE FOOD

C-stores continue to struggle

to attract the female consumer

WAWA’S SUMS UP FRESH OPPORTUNIES

"Consumers are looking at us not as a

convenience store,'' he said. "They are

perceiving us as a food service establishment” Howard Stoeckel, CEO, Wawa

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made-to-order hoagies, coffee drinks, dairy products, breakfast sandwiches,

wraps, baked goods, salads, fruits….

and cool, self-service ordering technology

that super sizes orders…….

S/S Ordering

Terminals

Capturing

QSR Sales

Convenience foods

driving the demand

in every channel

25% INREASE IN THE NEED FOR REFRIGERATED MERCHANDISERS

EQUIPMENT, PROGRAMS, PACKAGING SCALED TO SMALLER FOOTPRINT

FRESH FORMATS

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Right sized

Right features

Merchandising focused

Flexible

Quiet and compact

BEYOND BEER BEER CAVES DRIVE DEMAND, PROFITS & LOYALTY

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Inviting-interesting

Colder-cool factor

Fun-thrill of the hunt

Influencing-self expression

Endless aisles- endless

assortment

Less OOS

Bigger packs

High destination

Can

increase

sales by

over 50%

• The big picture: large beer brands are down,

craft beer labels are up. The beer industry as

a whole had four straight years of sales

decline as of 2011, with big brands taking a

heavy hit.

• NBC reports that Budweiser lost 30% of their

sales from 2006 to 2010 while Michelob and

Milwaukee’s Best have also lost upwards of

half their sales during that time. Yet craft

beers are on the rise, with sales rising 15% in

2011. Even more exciting–the craft beer niche

claimed more than 5% of the national beer

volume for the first time ever this year.

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MILLENNIALS ARE 21% OF THE ADULT POPULATION, BUT DRINK 29% OF CRAFT BEER VOLUME

Millennials will propel this category

for the next decade and beyond

MAIN CHEERLEADERS BEHIND CRAFT BEER GROWTH? YUP, THOSE MILLENNIALS

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Good craft

beer is

becoming

such a luxury

purchase–

equivalent to a

nice glass of

wine….

One high-

quality craft

beer instead of

two bland

beers

comprises their

night out….

Craft beer is

just cooler.

Perhaps

more than

any other

generation,

Millennials

love

presenting

themselves

as

individuals.

Big brand

advertising

lately has

focused

primarily on wit

and humor

over quality–

and it’s not

doing them

any favors with

Millennials.

Social media

adds to craft

beer’s “cool”

factor. It

allows users

to connect

beer brands

with their

identities in a

fun way.

CAVE RULES ITS ALL ABOUT

THE EXPERIENCE

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Define a unique cave experience

No clutter

28 degrees

Meticulously clean

Constantly reflect latest trends-craft beers

C-store advantage-satisfy “I want it now”:

Location

Longer hours

67% consumers enjoy trying

seasonal craft beers

(especially women)

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1. Ceiling heights – 12’ with coils mounted in center of cooler space

2. Windows-minimum - 10’ making the part of the retail space

3. Graphics, signage, flooring, etc. - seamless from from store to cave

4. Lighting levels - 30% brighter than store ambient

5. Pallet racking - 3 shelves high for maximum impact & SKU mix

Mike Lawshe, CEO Paragon 4 Design, Fort Worth Texas

Five Key

Design Elements

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Ethnic

Cold

Beer

Cave

Health

&

Wellness

Local

&

Authentic

Fresh

Food

Fast

Women

Welcome

AS THE GO-TO BAIT FOR DRIVING PRODUCTIVITY &

SHOPPER FREQUENCY, FOOD CONTINUES TO CROSS

CATEGORIES AS RETAILERS LOOK FOR WAYS

TO BUILD THE BASKET.

27% of convenience store gross

profit dollars in 2012 were

foodservice

NON TRADITIONAL GROCERY WILL SURPASS TRADITIONAL BY 2018

WHY WE BUILD MORE FRESH FORMATS……….

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% change

+ 4.7%

+5.6%

+ 6.0%

+7.0%

+6.9%

70% of respondents buy

prepared food

at C-Stores

THANK YOU!

PARAGON 4 DESIGN FOR PHOTOS AND CONTENT

Merchandising By Design, Inc. , 2633 Elmbrook Dr., Carrollton, Texas 75010

Phone (214)-883-5013 * Fax (972)307-3180 * merchandisingbydesigninc.com 43

Presentation available on merchandisingbydesigninc.com

Attract & influence wider customer base: women, Millennials,

Boomers, Hispanic…..through store design & product offerings…

Fresh food offerings to satisfy health & wellness trends…

Capitalize on key trends FAST; craft beers/beer caves, expanded

dairy, produce, fresh-foods-fast ...

Store designs that are “local”, uncluttered, flexible, interesting,

influencing & sustainable…

THANK YOU!

ANHEUSER BUSH BEER CAVE INPUT