WINNING Information to Help You Compete and Succeed in the Convenience & Fuel

Retailing IndustryAugust 4, 2011

Today…

About NACS About Our Industry By The Numbers About PCI & Date Security Categories & Best Practices 2010 ADA Differentiation

I will not to use profanity when the subject of swipe fees and banks come up

I will not to use profanity when the subject of swipe fees and banks come up

I will not to use profanity when the subject of swipe fees and banks come up

I will not to use profanity when the subject of swipe fees and banks come up

I will not to use profanity when the subject of swipe fees and banks come up

I will not to use profanity when the subject of swipe fees and banks come up

I will not to use profanity when the subject of swipe fees and banks come up

I will not to use profanity when the subject of swipe fees and banks come up

I will not to use profanity when the subject of swipe fees and banks come up

I will not to use profanity when the subject of swipe fees and banks come up

I will not to use profanity when the subject of swipe fees and banks come up

SPEAKING OF BANKS…

Interchange Rates

Source: Merchant Payments Coalition

WE DID FIND ONE COUNTRY THAT CHARGED HIGHER INTERCHANGE RATES THAN THE UNITED STATES…

HOW I FEEL ABOUT THE BANKS AND CREDIT CARD COMPANIES…

ABOUT NACS

BORN IN 1961

NACS’ three pronged focus

Knowledge– State of the Industry (SOI)

Data through CSX– Support of Technology

standards (PCATS)– Industry research– Educational products– NACS Magazine & NACS

Daily– NACS Help Desk

Advocacy– Government Relations– Media Relations

Connections– The NACS Show– NACStech Show– SOI Summit– HR Forum– NACS Leadership Forum– NACS Global Forum & Study

Tours– NACS Social Media

ABOUT OUR INDUSTRY

Our 146,300 stores…‒ Equal more than Warehouse Clubs (Costco) + Supercenters (Walmart)

+ Dollar stores (Dollar General) + Mass Merchandise stores (Target) + Supermarkets (Kroger) + Drug stores (Walgreen’s) combined

Over 90,000 of stores are run by single store operators 2010 sales equaled $576 Billion USD We process about 166 million transactions per day– Equal to the entire mobile population of the United States shopping

with us daily 98% of Americans shop at c-stores once/month We sell 82% of the motor fuel sold in the U.S.

About our industry

We employee about 1,500,000 million workers on the retail side alone

Some of our members made Fortune Magazine’s 100 Best Companies to Work For in the USA in 2010

We have stores in every congressional district Our stores are physically closer to the homes of America than

any other channel of trade – We are the “neighborhood” store

We are the mosaic of America– Every race, creed, gender, income, age

About our industry

ABOUT PCI & DATA SECURITY

Skimmers are our biggest threat

The skimmer threat is real

How are unattended POS PEDs (like AFDs) being compromised?

Criminals instead obtain access to install the capture device on-site by:– Obtaining a generic “brass key” for dispenser model being targeted

• Many dispensers do not have unique key locks installed• Critical to train site employees to question anyone unexpectedly

attempting to service” or “upgrade” one of their dispensers • Store personnel need to inspect pumps at least once per day• Consider tamper-proof security seals on all pumps

Additional Resources

NACS Compliance Resource Center– http://

www.nacsonline.com/NACS/Resources/PCICompliance/Pages/default.aspx

‒ http://www.nacsonline.com/NACS/News/NACSTV/Pages/WeCare.aspx?tgrp=2&src=home112

BY THE NUMBERS

Industry Sales

Source: NACS State of the Industry Survey of 2010 Data & CSX, LLC.

In-Store Sales Contribution Average Monthly Sales = $127,533 4.4%

Source: NACS State of the Industry Survey of 2010 Data & CSX, LLC.

In-Store GP Dollar ContributionAverage Monthly Margin = $40,744 4.4%

Source: NACS State of the Industry Survey of 2010 Data & CSX, LLC.

CATEGORIES & BEST PRACTICES

Cigarettes GrowthJan 2008 = 100

Source: NACS State of the Industry Survey of 2010 Data & CSX, LLC.

Cigarettes

Source: NACS State of the Industry Survey of 2010 Data & CSX, LLC.

SubcategoryMonthly Average

GP$/StoreChange GM %

Premiums $6,209 7.9% 16.23%

Branded Discount $596 (5.4)% 16.06%

Sub-Gen/Private Label $1,093 12.1% 16.27%

Fourth Tier $29 30.9% 13.89%

Total $7,927 7.4% 16.21%

Cigarettes Gross Profit2010 vs. 2009

Source: NACS State of the Industry Survey of 2010 Data & CSX, LLC.

OTP GrowthJan 2008 = 100

Source: NACS State of the Industry Survey of 2010 Data & CSX, LLC.

OTP Syndicated SalesAverage Monthly = $3,634 per Store

Source: Nielsen Syndicated – Convenience Tracking – Total US

SubcategorySales

(Millions)

Sales

Change

Units

Change

Smokeless $3,683.7 13.4% 10.9%

Cigars $2,302.3 12.4% 8.7%

Papers $237.3 13.7% 11.6%

Pipe/Cigarette Tobacco $153.2 4.0% (24.4)%

Other Products & Pipes $4.9 31.0% 24.4%

Total $6,381.2 12.8% 9.3%

OTP Syndicated Sales2010 vs. 2009

Source: Nielsen Syndicated – Convenience Tracking – Total US

OTP Gross Profit2010 vs. 2009

SubcategoryMonthly

GP$/StoreChange GM%

Units

Change

Smokeless $890 15.1% 26.5% 10.9%

Cigars $744 11.7% 35.5% 8.7%

Papers $118 7.5% 55.0% 11.6%

Pipe/Cigarette Tobacco $43 9.3% 31.0% (24.4)%

Other Products & Pipes $2 10.2% 35.8% 24.4%

Total $1,798 13.0% 30.9% 9.3%

Source: NACS State of the Industry Survey of 2010 Data & CSX, LLC.

Greater dedication to the OTP category | profit center– Merchandising & Marketing– Store Operations

Better assortment planning– Take advantage of item assortment tools either within your company or

those provided by your wholesaler or manufacturer• Perform assortment and space analysis to gain the highest return from

available space• Quantify impact of different assortment scenarios

Greater visibility of product– Get it off the bottom or sides of tobacco fixtures and give it a good

home– Engage suppliers on fixturing that works to support visibility, differing

store configurations, and sales & profits

45

What are best practices?

Operations and Marketing works best together to ensure proper store level execution‒ For small operators who wear both hats, need to make sure

you can deliver in the store what you are advertising to your customers

Train store staffs – Make sure product is always stocked and faced; re-

merchandising is a perfect activity to perform between waiting on customers

– Rotate product: consumers always look at the freshness date

46

What are best practices?

What are best practices?

47

48

What are best practices?

Foodservice Sales GrowthJan 2008 = 100

Source: NACS State of the Industry Survey of 2010 Data & CSX, LLC.

Cold Dispensed

Hot Dispensed

Frozen Dispensed

Commissary/Package Sandwich

Prepared Food

Total Foodservice

Foodservice Gross Profit GrowthJan 2008 = 100

Source: NACS State of the Industry Survey of 2010 Data & CSX, LLC.

Per Store/Per Month Sales $ Margin $ GM%

Prepared Food $19,162 $10,251 53.5%

Hot Dispensed Beverage $6,939 $3,676 53.0%

Cold Dispensed Beverage $2,965 $1,610 54.3%

Frozen Dispensed Beverage $2,263 $1,351 59.7%

Commissary/Packaged Sandwiches $1,732 $628 36.2%

Foodservice

Source: NACS State of the Industry Survey of 2010 Data & CSX, LLC.

Per Store/Per MonthSales % Change

GP %

Change

Prepared Food 1.6% (0.2)%

Cold Dispensed Beverage 11.9% 11.7%

Frozen Dispensed Beverage 7.3% 5.5%

Hot Dispensed Beverage 2.1% 0.1%

Commissary/Packaged Sandwiches (3.5)% (25.5)%

Foodservice Sales and Margin Change

Source: NACS State of the Industry Survey of 2010 Data & CSX, LLC.

2010 vs. 2009

Prepared Food GrowthJan 2008 = 100

Source: NACS State of the Industry Survey of 2010 Data & CSX, LLC.

Commissary|Packaged Sandwich GrowthJan 2008 = 100

Source: NACS State of the Industry Survey of 2010 Data & CSX, LLC.

Making a comeback in 2011Making a comeback in 2011

Hot Dispensed GrowthJan 2008 = 100

Source: NACS State of the Industry Survey of 2010 Data & CSX, LLC.

Cold Dispensed GrowthJan 2008 = 100

Source: NACS State of the Industry Survey of 2010 Data & CSX, LLC.

Frozen Dispensed GrowthJan 2008 = 100

Source: NACS State of the Industry Survey of 2010 Data & CSX, LLC.

Foodservice is not just another category From the cleanliness of the parking lot to the cleanliness of the

washrooms as well as the food itself…all will be considered when customers are making a purchase

Need to pay attention to all the details‒ Clean store‒ Fast, friendly service‒ Quality food

C-store Foodservice comes with customer perception “baggage” that needs to be overcome

Food and gasoline don’t mix Food isn’t fresh

Foodservice requires commitment Time, people, and resources

58

What are best practices?

Start simple and get the basics right Coffee

‒ People buy gas once a week but they buy coffee every day‒ One bad smell will spoil the whole program‒ When in doubt, dump it out

Fountain‒ Always in service means always selling

Roller grill‒ They’re not made of gold and don’t increase in value the longer

you keep them‒ When in doubt, throw it out

59

What are best practices?

Install an evaluation process Preparation processes and profitability Tasting and testing Customer feedback

At the end of the day, everyone in the organization should be proud enough of the foodservice program to serve food at least twice to…

Their kids Their grandkids Their parents

Their expectant wife Their girlfriend or boyfriend Their pastor…

60

What are best practices?

2010 AMERICANS WITH DISABILITIES ACT

Why are we here?

Why Am I Here?

Sec.36.302Modifications in policies, practices, or procedures.

Miniature horses. (i) a public accommodation shall make reasonable modifications in policies, practices, or procedures to

permit the use of a miniature horse by an individual with a disability if the miniature horse has been individually trained to do work or perform tasks for the benefit of the individual with a

disability.

The Rule, Not The Exception

It’s not about It’s not about equal access…equal access…

it’s about lining it’s about lining attorneys attorneys pockets. pockets.

Enforcement

DOJ Consent Decree Fines -- $55,000-$110,000 Other relief

CONSENT DECREES Little General Store, Inc. – October 2003 Sunoco, Inc. – November 2005 Twin Cities Avanti Stores LLC – July 2006 Quik Trip – July 2010

Top Priorities for DOJ & “Advocates”

Fuel, Window Washing & Paper Towels Air, Water, & Vacuums Accessible Parking and Access Aisles Access to the Entrance Drinks & Food Bathrooms Sales and Service Counters ATMs & Vending Machines

Top Priorities for DOJ & “Advocates”

Recommendations

1. Survey existing facilities2. Make obvious corrections first3. Redesign prototypes for new stores – get input from

experienced architect- Get input from an experienced ADA architect

4. Train or retrain personnel in dealing with and assisting disabled patrons

5. If sued, get an attorney experienced in Title III litigation6. Consider costs of litigation versus costs of compliance

Additional Resources

1991 ADA Standards– http://www.ada.gov/stdspdf.htm

2010 ADA Standards– http://www.access-board.gov/ada-aba/ada-standards-doj.cfm

Register to receive updates on compliance requirement changes and publications– www.AccessUpdates.com

Corey Fitze – NACS Director of Government Relations‒ 703-518-4283 ‒ cfitze@nacsonline.com‒ http://

www.nacsonline.com/NACS/Resources/Pages/ComplianceAssistance.aspx

DIFFERENTIATION

Remember this?

Remember this?

How do we differentiate ourselves?

My store

Reality is…

We are over assorted!!!

Reality is…

v

12’ of oil and auto parts4’ of pet food

Reality is…

Who knows what this is?

Suspend reality…

Truth is stranger than fiction.

What if we could find a better use for that space?

Think outside of the box…

What if we could find a better use for that space?

Think outside of the box…

What if we could find a better use for that space?

Salsa Sale

Think outside the box…

What if we could find a better use for that space?

It’s BBQ TIME!

Think outside the box…

We can replace slow moving items with products that tie in with what we sell– Ice, beer, and soda (plus coffee): pop up and traditional coolers– Hot dogs and hot dog buns: single use grills– Gasoline: single use and traditional gas cans– Bottled water: filtered water sold in refillable containers– All kinds of cold beverages: fresh popcorn

Bottom line.

We can sell smaller, “auto-friendly” sized products We can sell higher margin items We have the ability to be more creative than the competition We sell refreshment We are the “Pantry of America”…we offer that small reward

many of our customers are looking for

Bottom line.

Our industry puts up with more crap than any other channel– Credit card fees and mandates– Perception that we make a huge profit selling motor fuels– Customers driving to hell and back to save 40¢ on a fill up– Regulation after regulation including new FDA control of tobacco

Despite a tough year, we’re bound to sell more stuff as consumers become more time starved and looking for a “reward” – We need to understand our customers better– We are squeezed by space– We need to know our competition better– We need fresh eyes

Bottom line.

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 Marketers can differentiate themselves…

– Provide more benefits and discounts– Provide more information and education

See me or contact me for more information

OPPORTUNITIES NOWHEREOPPORTUNITIES NOW HERE

Thank you!

Contact Info

Michael DavisNACSmdavis@nacsonline.com

O: +1 703 518 4246M: +1 302 228 3038D: 1 888 843 5705