Issues & Leaders With Don Longo: Sonja Hubbard

JERSEY CITY, N.J. -- Who are the authorities on the future of the convenience store industry and what can you learn from them? In a new series of exclusive one-on-one interviews with c-store industry leaders, Convenience Store News Editor-in-Chief Don Longo explores the most important trends and issues facing the convenience store industry.

Longo's first interview is with Sonja Hubbard, CEO of E-Z Mart Stores, one of the largest privately held convenience store chains in the nation with more than 300 stores. The first female chair of NACS, Hubbard is well-known for being an industry champion and trailblazer. In December of 2010, she was inducted into the Convenience Store News Hall of Fame.

Longo: What do you consider to be the most important trends influencing retailing today?

Hubbard: Well, I think the biggest affirmation that came out of the recession was that convenience is NOT a trend -- it is much more than that. We saw that our business is resilient and resistant to the economic ups and downs. People are still time-starved -- in fact, becoming more time sensitive -- even the younger people. My niece, for example, is 16 years old and she has a busier schedule than I had when I was 25 with a new baby and a job. All this provides us with more opportunities to fill the needs for people in a hurry.

Another important trend is social media as a way to communicate with 18-25 year olds.

'Healthier' is a trend too. I question whether it is consumer-driven or politically-driven but my hope is that eating healthier is being preached so much in schools that children will learn to make healthier choices now and as they grow up.

Longo: Please comment on the most significant developments relating to the convenience store industry and how these specifically impact E-Z Mart?

Hubbard: The issue of unfair swipe fees has been our biggest government-relations issue. I'm going to D.C. next week (in February) to testify to the Federal Reserve panel about swipe fees. I truly believe we are a competitive industry and we will find a way to give the savings (on swipe fee reform) back to the consumer. The banks are trying to demonize us by saying we are being the greedy ones for trying to get the profits that they want to keep for themselves. Even worse, they use those profits to give away credit cards to people who aren't credit worthy -- ranking up even more profits on these customers.

With tobacco regulation, we knew what was coming. We've seen it all in Canada with the legislation on graphics and packaging. Right now, the menthol issue gives me the most cause for concern. Menthol cigarettes are a core product that's been offered to adult consumers for decades. There is no reason to ban it.

I don't know where fuel is going. NACS has developed a study group to determine the future of fuels. We know corn-based ethanol is not the most efficient fuel. Is it natural gas? Hydrogen? Electric? It's probably some kind of combination. But we need to take a cohesive look at the future alternatives.

There's a convenience niche for foodservice. People have a more sophisticated palette now and they want more diverse tastes. And ethnic groups have their own diverse tastes as well. When I spoke at the AWMA show, I pointed out that home meal replacement is a huge unmet need that we as an industry have had problems fulfilling -- but, we can collaborate with manufacturers to do it.

Longo: You, personally, have taken a leadership role in the area of health and wellness, such as promoting the availability of nutritious food in so-called food deserts. What do these programs offer the convenience industry from a market leadership standpoint?

Hubbard: I hope these programs help us fill a need in some underserved communities, providing them with a wider selection of healthier food, but to be a sustainable program it must be profitable. If we can be a more relied-upon retailer in these markets, we could also forestall some negative and onerous legislation. I'm proud of the NACS Nutrition Campaign. Many manufacturers have already joined in with healthier products.

Longo: At E-Z Mart, you've also been a proponent of change to meet customers' needs. How is E-Z Mart changing to meet these needs?

Hubbard: We just enlarged our management level at store support to expand our efforts in a lot of areas. Inside the stores, we've reinstalled freezers in some stores and changed our product mix using data to identify opportunities, such as high Federal food stamp redemption areas. Food Stamp sales were up 45 percent last year. There are more people in need and we felt there were opportunities in these stores to add more fruits, vegetables, frozen entrees, orange juice, with mixed results. Some stores did much better than others with these products.

Longo: The challenge to build closer connections with shoppers is a mandate before all retailers today. How have you traditionally marketed E-Z Mart's offerings to consumers and what's different about how you do it now?

Hubbard: As I said earlier, social media is the way to communicate with people in the younger age bracket. Facebook, Twitter -- these are going to be the future of marketing. We don't do a lot of radio or TV because our stores aren't so heavily concentrated. We do a lot of advertising pieces inside the store. It's very colorful with lots of signs screaming at you so we have to be careful not to overdo it. In numerous stores, we added TV screens inside flashing promos. Pump toppers have also been effective at getting people to come into the store. But, if we can do it right, the most effective form of promotion is the clerk. We're focused on training them in suggestive selling because they will pay off in the long run.

Longo: Please discuss the role manufacturers play in today's convenience store industry and how has the retailer-supplier relationship evolved over the past five years? How is it likely to change in the next five years?

Hubbard: I said in my speech before the AWMA (American Wholesale Manufacturers Association) earlier this year that to be incrementally better, you need to be competitive; but to be exponentially better, you need to be cooperative. What I mean by that is that we've been so competitive over the years, squeezing every cost out. But, there's so much more we can do by cooperating, such as developing the home meal replacement category. In Europe, you see these high-quality, hermetically sealed foods. Manufacturers have so much more information and data than retailers. They can help us individualize and customize our stores -- for example, they can tell me which stores I can successfully sell sushi in. We should be partnering and even sharing the costs of these efforts.

Another example of cooperation-- we could be sharing a commissary, perhaps working with schools that are having budgetary issues.

Longo: Switching gears, what are the foremost non-industry specific retailing issues that are on your mind?

Hubbard: I worry about the budget deficit. It's a huge problem. Our entitlement programs have grown so huge and unmanageable. We do have a crisis in health care, but I hate the mandates of the new health care law.

Right now, fuel cost is a concern. It takes discretionary income right out of the pockets of our customers.

And my biggest long-term concern is the state of education in this country. We have dumbed down our educational system to the point where we are not competitive with the rest of the world. For example, did you know that India's top 25 percent of performers outnumber our entire study base in the U.S.? We have to focus on improving and individualizing our educational system in America.