CSN EXCLUSIVE: The C-store Channel's Path to Growth in 2024

NATIONAL REPORT — Last year saw consolidation among big-name brands in convenience — like Maverik — Adventure's First Stop's acquisition of Kum & Go LC and bp's purchase of TravelCenters of America Inc. (TA) — topping the news alongside a variety of smaller deals. 

In the 2024 Convenience Store News Forecast Study, many convenience retailers predicted further growth in their store count, but a big question around this year is whether that will come from more acquisitions or an increase in organic growth.

Speed and simplicity mean more acquisitions are likely on the horizon, according to Terry Monroe, president of American Business Brokers & Advisors.

"Organic growth takes more time and involves more risk than buying an existing business with a proven cashflow," Monroe told Convenience Store News. "The numbers for return on investment are always stronger for acquisitions after you factor in the time it takes to find the right location, get the needed approvals to build, site work, design, then actually build the store and the time it takes for the new build to become cashflow positive."

Organic growth is also less popular because most of the A-rated locations are already taken, he added.

While further major deals on the level of bp and TA are not out of the question, this year's acquisitions are most likely to come from smaller brands getting out of the business, particularly family-operated companies that lack succession plans, Dennis Ruben, executive managing director at NRC Realty & Capital Advisors LLC, told CSNews.

[Read more: Avoiding Pitfalls in the Divestiture Process]

"What we're seeing now is the small to midsize guys that are realizing they can't compete with the big guys," Ruben said. "There's a smaller universe of operators now, and there's just been a ton of consolidation. I think it'll continue, but I think it's going to be more like the 10- to 50-store guys."

Companies that have made it part of their strategy to grow by a few new stores at a time will likely continue to pursue organic growth. This works for some of the big players such as Pennsylvania-based Wawa Inc., but financing new builds is harder for midsize companies, Ruben noted.

Hot Spots for Growth

Still, some markets remain hot spots for new builds. To identify them, "just follow the people," Monroe said, citing that migration trends data compiled from one-way U-Haul truck transactions in 2022 showed that Texas is the No. 1 growth state, followed by Florida.

In 2024, Ruben expects to see slow and steady growth from small operators that want to stay in the business and invest in store count.

"A lot of these small guys also don't like debt. When I go to these trade shows like SIGMA, when we talk about how they're being financed, a lot of them have either relationships with local banks or they'll really want to keep their debt to a minimum, which I don't blame them for," he said.

In contrast, the big companies will get bigger, faster.

"They have the infrastructure to grow," Monroe said. "It is easier and more economical for the large chains to grow, and they can afford to take the risk."

[Read more: Number of U.S. Convenience Stores Increases for Second Consecutive Year]

Over time, consolidation and acquisition within the convenience store industry may have even changed the definition of what it means to be a large chain, he speculated. "It takes a lot of stores to get to the point that you can have all the different departments that will allow the company to focus on growth. It used to be if you had 25 stores, you were considered a big chain, but now we don't know if 100 stores is enough to allow you the proper infrastructure that could provide the company with the departments needed to be considered big."

Ruben pointed to Richmond, Va.-based GPM Investments LLC, North Charleston, S.C.-based Refuel and Falls Church, Va.-based Petroleum Marketing Group as companies he expects to pursue continued expansion through acquisition, while Altoona, Pa.-based Sheetz Inc., Wawa and Atlanta-based RaceTrac Inc. will keep growing organically.

Monroe, meanwhile, named Ankeny, Iowa-based Casey's General Stores Inc. as the growth chain to watch in 2024. 

"Under the management of CEO Darren Rebelez, they have reinvented themselves to be good at expanding their store count by becoming more aggressive at acquisitions of convenience stores and combined it with their ability to have organic growth too, which allows them to pick specific locations to build and specific markets to enter with acquisitions and then remodel the stores they acquired to the Casey's model," he pointed out.