Top 100: Two Key Segments Are Influencing the Makeup of Today’s Top C-store Chains

NATIONAL REPORT — Aside from a new trifecta at the helm of the 2019 Convenience Store News Top 100 ranking, this year’s list also spotlights two key segments that are influencing the makeup of today’s top c-store chains: oil companies and foreign companies.

Pointing to the rise of Marathon Petroleum Corp. (MPC) — which captured the No. 3 spot this year behind stalwarts 7-Eleven Inc. and Alimentation Couche-Tard Inc. — NRC Realty & Capital Advisors LLC Executive Managing Director Dennis Ruben said oil companies are making noise again in the c-store industry and appear to be "doubling down on retail."

"Marathon has been doing it more and longer than some others," said Ruben, noting that MPC's recent deals include the acquisition of NOCO Express in upstate New York. "They realize they are looking for an outlet for their production, and that makes sense for them."

MPC made a similar move with its 2014 acquisition of Hess Corp.'s retail network.

"What we are seeing is almost a reemergence of the oil companies in the retail space. BP teamed up with ArcLight Capital Partners to acquire Thorntons. That was a huge deal: 191 stores," Ruben said. "They announced publicly they are looking to get back into retail in a big way. A few years ago, they got out of retail. My company worked with them on it. They are moving back into the retail space."

In addition, Shell recently made headlines when it opened its first Shell Select convenience store in September and, in the second half of 2017, Chevron Corp. formed a joint venture with Jacksons Food Stores to rebrand locations to Chevron ExtraMile.

According to Ruben, there are currently three groups that are big into acquisitions:

• Traditional companies like 7-Eleven, Couche-Tard and GPM Investments Inc.;
• Oil companies like BP, MPC and Shell; and
• Foreign companies like EG Group.

"EG Group did or announced four deals in the past year. They seem to have an unlimited source of capital and an unlimited interest in acquiring assets in the U.S.," he said.

The Watch List

Steve Montgomery, president of Lake Forest, Ill-based consulting firm b2b Solutions LLC, believes 7-Eleven, Couche-Tard and MPC are likely to continue growing and retain their top rankings for the foreseeable future, although their positions might change from year to year.

"The industry continues to attract more and more investment from both foreign and domestic companies,” he acknowledged. “Companies such as EG and COPEC have made significant initial investment in the U.S. convenience/retail petroleum industry."

Montgomery also echoed Ruben's assessment of Big Oil. "The major oil companies are reconsidering their divestment of retail locations as shown by BP/ArcLight's purchase of Thorntons," he added.

EG Group, and its Cincinnati-based U.S. division EG America, is likely to move up the ladder. The company gained three spots this year, going from No. 16 on last year’s Top 100 ranking to No. 13 this year. The U.K.-based retailer is even looking at smaller deals.

Other emerging players Ruben thinks the industry needs to keep an eye on include Pittsburgh-based Giant Eagle Inc., which took ownership of Anderson, Ind.-based Ricker's in late 2018, and Ankeny, Iowa-based Casey's General Stores Inc.

"I think Casey's is under a lot of pressure to move the needle in terms of stock price. They are certainly growing mostly organically, but I think they've been much more aggressive in looking at deals than they have before," Ruben said.

Notably, the Midwest retailer acquired the Fantasy's Convenience chain in Omaha, Neb., in March. In all, Casey's opened 56 new stores and acquired 24 stores in its 2019 fiscal year, according to its June 11 earnings call. The company also replaced eight stores and has eight acquisition stores under agreement to purchase.

When looking at the current landscape, there are not that many big players left. Aside from Casey's, other sizable companies are Des Moines-based Kum & Go LC and Atlanta-based RaceTrac Petroleum Inc. — but neither appears to be in the market to sell, Ruben pointed out.

The number of stores operated by this year’s Top 100 comes in at 63,258, accounting for 41 percent of the overall industry. Drilling down further, the number of stores operated by the top 10 comes in at 41,804, accounting for 27 percent of the industry.

"People are going into new markets they weren't in before, so I can absolutely see the Top 100 control of the industry stores continue to go up every year over the next five years," Ruben said. "It wouldn't surprise me to see it reach 50 or 60 percent."

Looking five years out, Montgomery anticipates further consolidation driven by: economies of scale, as the relative general and administrative costs per site decrease as a chain's store count increases; a lack of a successor in family-owned businesses; and the low cost of capital.

The Convenience Store News Top 100 is the industry’s longest-running accounting of the largest convenience store chains by store count.