New Numbers, Insights Shared at NACS Summit

CHICAGO – The NACS State of the Industry (SOI) Summit, which wrapped up today, once again provided attendees with tons of numbers and thought-provoking opinions about the future of convenience stores, as well as the national economy.

The conference kicked off with a presentation by Dr. David Nelson, professor of economics at Western Washington University, focused on monetary policy, employment and key trends that c-store retailers “dare not ignore.”

On the economic policy front, Nelson scorched the Federal Reserve as being a destabilizing influence on the nation’s economy. Of interest to c-store retailers was his prediction that while inflation would remain low, food costs are rising rapidly. While food prices rose only 1.1 percent last year, they are expected to climb 2.5 percent to 3.5 percent this year. Among the culprits are coffee futures, up 71 percent; hogs futures, up 42 percent; cocoa, up 12 percent; wheat, up 11 percent; and live cattle, up 8 percent.

There’s no doubt in Nelson’s mind that the economy is recovering, supported by new federal jobs data. Ironically, there’s a relative shortage of unemployed workers who have been unemployed for a short time, while the long-term unemployed will find it increasingly difficult to find jobs, he explained.

The key trends to watch, according to Nelson, are:

• Demographics - The slow growth of the U.S. population and the aging Baby Boomers moving into years where they will not be driving as much.
• Technological changes – Less shopping at brick-and-mortar stores will also mean less driving, which impacts c-stores, and technology has reduced the desire of young people to drive because they connect digitally.
• Regulation – Business is operating in an environment in the United States subject to increasing government regulation, which impacts energy prices, tobacco taxes, minimum wage legislation, overtime rules for salaried personnel, and health care costs.

Glenn Plumby, vice president of operations for Speedway LLC, the retail division of Marathon Petroleum Corp., and Kevin Smartt, CEO of Kwik Chek Food Stores Inc., presented NACS' annual State of the Industry report, which indicated that while the industry hit a new high in in-store sales, foodservice growth – which has driven in-store sales growth over the past several years – was surprisingly low in 2013.

SOI Summit attendees were also a bit surprised by new regional data that showed the thought-to-be prosperous south central region (Texas) is trailing other parts of the company in sales and margin growth.

Other presenters included:

• Walter Zimmerman, chief technical analyst at United I-CAP, who gave another downbeat view of the nation’s economic prospects and warned attendees they “better have an exit strategy before the next bubble bursts.”
• Todd Hale, senior vice president, consumer and shopper insights, for Nielsen, who showed how c-stores are both challenged by and can capitalize on trends occurring in other channels of retailing.
• Eddie Yoon, principal of The Cambridge Group, who urged retailers to identify their “super” consumers and sell more to them.
• Tom Kloza, chief oil analyst at GasBuddy, whose entertaining motor fuels overview forecasted that North America will see much cheaper crude prices than the rest of the world this year, but seasonality will continue to cause wide price swings. He also cautioned fuel retailers to be careful about hedging. “Futures markets don’t reflect the regional or local dynamics anymore,” he warned. “There’s a real disconnect.”
• Bill Bishop, chief architect, Williard Bishop, and Dae Kim, NACS' vice president of research, presented the latest NACS/Coca-Cola Retailing Research Council study.
• Gray Taylor, executive director of PCATS, discussed commerce in the mobile age.