CONVENIENCE RETAIL: WHAT'S IN STORE FOR 2021? - Discovering Pockets of Demand February 9, 2021
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Discovering Pockets of Demand CONVENIENCE RETAIL: WHAT’S IN STORE FOR 2021? February 9, 2021
Today’s Presenters
Krishnakumar Nik Modi Jeff Neihart Kennith Fries
(KK) Davey Managing Director, Vice President & GM, Vice President,
President, Beverages, Tobacco & Client Development C-Stores
Strategic Analytics Household Personal Care Crossmark Crossmark
IRI RBC Capital Markets
© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 2
SECTION 1
IRI Perspectives
© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 3
Convenience Channel Growth Tends to Be Cyclical
and Is Often Driven by Macro Economic Trends
Convenience Channel Edible Sales – Quarterly % Change vs. YA Dollar Sales
12
10
GREAT
9 8 8
RECESSION 6 6 5 6 6
5 COVID-19
4 3 3 4
3 3 4 3 3 4 3 4 3 3 3 2 3 3 3 4 3 3 4
3 3
2 1 2 2
1 1
-1 -1 -1
-2 -2
-3 -3
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Disposable
Income
Housing Gas Prices
Mobility
Starts
Source: IRI POS data Convenience channel for edible scan products. Includes archived data.
© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 4
C&G’s 2020 Sales Dipped Dramatically with Mobility and Gas Prices in April-May;
Restricted Mobility Continues to Hold Convenience & Foodservice Sales Back
C&G Total Store Weekly $ % Change vs. YA
Weekly U.S. All Grades All Formulations Retail Gasoline Prices (Dollars per Gallon) % Change vs. YA
Convenience Stores $ % Chg Mobility % Chg
Gas Prices % Chg vs YA Restaurant $ % chg. vs. YA
15
10
5
0
-5
-10
-15
-20
-25
-30
-35
-40
-45
-50
-55
-60
-65
-70
-75
-80
-85
-90
-95
01- 01- 02- 02- 03- 03- 03- 04- 04- 05- 05- 06- 06- 07- 07- 08- 08- 08- 09- 09- 10- 10- 11- 11- 12- 12- 12-
05- 19- 02- 16- 01- 15- 29- 12- 26- 10- 24- 07- 21- 05- 19- 02- 16- 30- 13- 27- 11- 25- 08- 22- 16- 20- 27-
20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20
Source: IRI POS data, U.S. Energy Information Administration, Google Mobility based on Retail and Recreation % Chg from pre-COVID-19 baseline (Jan 3-Feb 6, 2020), IRI On
Premise bases on full service dining, includes restaurants that have closed.
© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 5
Convenience Slowed Down in 2020 as E-commerce, Key Criteria
Grocery, Club and Dollar Channels Emerged as Key Winners for Shopping
Total CPG % Change vs. YA • One-stop shop
Trend vs.
• Selection,
2019 vs. 2018 2020 vs. 2019 2019 growth variety, value
Total Omnichannel 3.2% 15.5% • Safety, self-
MULO Brick & Mortar 1.3% 11.5% checkout,
contact-less
Grocery Brick & Mortar 1.0% 16.3%
payment
Mass Merch. Brick & Mortar1 1.6% 3.6% • Convenience
Club (Sam’s, BJ’s & Costco)1 2.6% 14.1% including
curbside pickup,
Drug1 -0.5% 0.9%
delivery
Convenience 3.4% 2.9%
E-commerce2 22.0% 58.6%
Dollar1 12.7% 19.3%
Note: Omnichannel includes MULO + C + Costco + Dollar + E-comm. 2020 = data ending Nov 29, 2020, forecast for remainder of year. Source: IRI POS, eMarket Insights and Consumer Panel
1. 2020 vs. 2019 based on 52 weeks ending Nov 29, 2020 vs. YA. 2. E-commerce data includes e-commerce of MULO and Grocery as well as pure plays. Dollar based on Panel
© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 6
Convenience Volume Sales Declined Across the Second Half
of 2020, While Increased Price/Mix Recovers Some Value
Sales and Price / Mix Trends: Total Store / Edibles / Nonedibles Total Store Edibles Nonedibles
% Change vs. YA, C&G
2019 2020 Q1 Q2 Q3 Q4
5.6
3.4 2.8 2.6 2.9 4.4 2.8 3.3
2.8 2.2 2.9 3.0 2.8 3.3 2.1 2.3
DOLLAR SALES 1.3 1.3
4.6 3.9 4.1 4.9 4.7 5.1 4.7 4.6 4.9
4.0 4.2 3.8 3.2 2.3 4.2 3.7
3.6
3.3
PRICE / MIX*
0.5 1.5
0.1 0.3
VOLUME SALES
-0.8 -0.8 -0.5 -1.2 -0.4 -1.2
-1.8 -1.2 -1.7 -1.8 -2.3
-2.7
-3.6 -3.5
Source: IRI PS data ending 12/27/20; *Dollar sales-weighted price per volume and volume change across categories
© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 7
High-Growth Categories Pre-, During-COVID-19 Include Bev Alcohol,
Sports Drinks; Snacks Decelerated as On-the-Go Occasions Eroded
Top 20 Total Store Categories with Sales of $1B+ // C&G // % Change vs. YA
Ranked by C&G CY 2020 $ (MM) Category Dollar Sales Growth
2019 2020
2020 $ 52 WE 12/27/20 Above Total Store Growth
TOTAL STORE $164,150 3% 3%
EDIBLE $84,735 3% 3%
NONEDIBLE $79,416 2% 3%
BEER/ALE/ALCOHOLIC CIDER $23,246 4% 14%
WINE $1,277 6% 10%
SPIRITS/LIQUOR $1,731 16% 31%
CIGARETTES $56,108 -1% 1%
SMOKELESS TOBACCO $8,131 5% 8%
ELECTRONIC SMOKING DEVICES $4,863 72% 5%
CIGARS $3,846 0% 10%
SALTY SNACKS $5,363 5% -6%
CHOCOLATE CANDY $2,887 0% 2%
NON-CHOCOLATE CANDY $2,177 3% 4%
DRIED MEAT SNACKS $1,746 4% 5%
PASTRY/DOUGHNUTS $1,628 4% -7%
ENTREES - RFG $1,337 -1% -8%
ENERGY DRINKS $9,835 9% 2%
CARBONATED BEVERAGES $8,630 0% 0%
BOTTLED WATER $4,275 3% -5%
TEA/COFFEE - READY-TO-DRINK $3,342 0% -1%
SPORTS DRINKS $3,264 6% 6%
BOTTLED JUICES - SS $1,512 -1% -2%
MILK $1,359 -7% 0%
Source: IRI TSA
© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 8
De-Densification of Cities Is Hurting Sales in Urban Markets, While Suburban /
Rural Are Driving Growth; Shifts Indicate a Need for Retooling Assortment
All Stores Suburban
Performance by Store Location // Non-Alc LRB + Snacks // C&G Comp Stores Rural Urban
Dollars, % Change Trips, % Change Dollars per Trip, % Change
Suburban and rural clusters have led sales Trip traffic continued to be a weakness across all Despite fewer trips, shoppers are spending more
recovery in 2020, while urban stores struggled clusters as work commutes are disrupted and on each trip across all stores; a sign of
when faced with work-from-home disruptions, “pantry stocking” behavior remains popular in avoidance to store exposure and elements of
gov’t restrictions and civil unrest other channels stock-up behavior / seeking large packs
0.2 -3.7 4.0
-0.2 -4.0 3.9
Q1’20 Q1’20 Q1’20
0.4 -3.4 4.0
0.4 -3.9 4.4
-3.6 -15.3 13.7
-3.0 -14.7 13.6
Q2’20 Q2’20 Q2’20
-3.5 -15.1 13.7
-10.0 -21.6 14.8
4.2 -6.7 11.7
5.3 -5.6 11.5
Q3’20 Q3’20 Q3’20
3.8 -7.1 11.7
-0.5 -11.1 11.8
4.2 -7.4 12.5
6.4 -5.4 12.4
Q4’20 Q4’20 Q4’20
3.3 -8.2 12.5
-2.9 -13.8 12.6
Source: C&G Retail data thru 12-31-2020;
© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 9
With Flexibility of Work-From-Home, Convenience Is Seeing Increased Weekday
Sales; Even in Recovery, Many Workers Will Work From Home Part-Time
Day of Week % Chg, Non-Alcohol LRB + Snacks / Dollars, Comp Stores
Q1’20 Q2’20 Q3’20 Q4’20
ALL DAYS WEEKDAYS (Monday – Thursday) WEEKENDS (Friday – Sunday)
FY 2020 FY 2020 FY 2020
+1.2% +2.6% -0.6%
13.8
12.5
10.0
6.2
4.3 5.2 4.5 4.8
4.2 4.2 3.9 4.2
2.0 2.2 2.0
0.2 0.5 0.9 0.4
-0.2 -0.5 -0.7
-2.8 -3.1 -2.6
-3.6 -3.5 -3.5
-4.3 -4.4
-6.6
-7.6
All Days Monday Tuesday Wednesday Thursday Friday Saturday Sunday
Dol % Share of
Total Wk (FY2020) 13.8% 14.2% 14.8% 15.3% 16.3% 14.0% 11.5%
Pt Chg vs. YA
(FY2020) 0.1 -0.1 0.3 0.4 -0.4 -0.3 -0.1
Source: C&G Retail data thru 12-31-2020;
© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 10Mornings Continued to Struggle Even in the Last Two Quarters
of 2020; Morning Share Was Lost to Later Day Parts
Time of Day % Chg, Non-Alcohol LRB + Snacks
Q1’20 Q2’20 Q3’20 Q4’20
Dollars, C&G Comp Stores*, All Shoppers
10.8
6.8 7.2 7.4
6.3 6.5
5.2 4.9 5.5
4.2 4.2
1.8 1.7 1.7
0.9 0.6 1.1
0.2
-0.8 -0.1 -0.2
-1.2
-1.4
-3.0
-3.6
-10.2 -10.8
-12.2
Total Day Early Morning Morning Mid Day Afternoon Evening Late Night
(2a-6a) (6a-10a) (10a-2p) (2p-6p) (6p-10p) (10p-2a)
Dol % Share of
Total Day (FY2020) 11.3% 21.9% 22.7% 22.2% 15.7% 6.3%
Pt Chg vs. YA
(FY2020) -0.3 -1.1 0.5 0.2 0.7 -0.1
Source: C&G Retail data thru 12-31-2020;
© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 11Convenience Relies Heavily On Large Manufacturers, as a Result
the Declines for Large Manufacturers Are More Pronounced
% Share of Total Store Sales by CPG Manufacturer Size / Total U.S. Convenience / Total U.S-Conv
Avg Chg vs YA
2016-19 2019-20 vs. YA vs. YA vs. YA vs. YA
Private Label 2.2 2.4 2.2 2.4 2.0 2.3 2.3
4.1 0.1 -0.2 4.6 0.0 4.6 -0.5 -0.2 -0.1
Extra Small ($100M) 6.7 7.2 7.0 7.1 7.4 7.3
0.2 0.5 0.5 0.4
0.4 0.6
Medium ($>1B) 15.5 0.8 18.7 0.4 19.1 18.7 19.3 19.2 0.5 19.3 0.5
0.0 0.5
72.3 -1.2
67.8 -1.0 -0.6 -1.3
66.8 67.6 -0.5 67.1 66.4 66.4 -1.2
Large ($>6B)
2016 2019 2020 2020 Q1 Q2 Q3 Q4
MULO Large Manufacturers Share
ppt change (2020 vs 2019): -0.8
Note: Note: Large is $6B+ in L52W, Medium $1-6B, Small $100M-1B and Extra SmallMidsize Chains Are Disappearing as Larger Firms
Buy Them Up to Build Scale; Independents Dominate by Number of Stores
Convenience Store Industry Consolidation
Convenience Channel M&A Activity Store Counts by Chain Size
154,535 153,237
In 2017, 7-Eleven acquired 1,108 145,119 148,126
Sunoco stores 19,252 19,969 26,629 34,786 Large Chains
(13%) (13%) (17%) (22%) (>500 Stores)
In 2015 / 2016 / 2017, Circle K parent 30,402 18,045 Small &
35,910 34,948
Alimentation Couche-Tard acquired 1,800 (25%) (24%) (20%) (12%) Midsize Chains
(2-500 Stores)
The Pantry stores, 1,146 Valero stores, and
522 Holiday Stations
Independents
Acquired 1,500 HESS / Wilco HESS stores 89,957 93,209 97,504 100,406
and in 2018 / 2019, 1,100 Andeavor stores (62%) (63%) (63%) (66%)
In 2018, EG Group acquired 1,000 Kroger
Convenience stores, 225 TA stores, 75
Certified Oil stores, and 600 Cumberland 2006 2011 2016 2020
Farms locations
In August 2020, 7-Eleven entered an agreement with Marathon Petroleum Corp. to acquire
the 3,900 store Speedway chain. The addition of Speedway would lift 7-Eleven to 14,000 units.
Source: NACS State of the Industry Report of 2019 Data. IRI Growth Consulting secondary research. IRI Growth Consulting Analysis; https://www.supermarketnews.com/retail-financial/7-eleven-buying-3900-speedway-stores-21-billion-deal
© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 13Consumer Mobility, a Key Factor in At-Home vs. Away-From-Home Consumption,
is Likely to Increase in Early to Mid-2021 as Vaccine Distribution Expands
Likely Vaccine Adoption Timeline Workplace Mobility Scenarios
Optimistic
Scenario
10 ACTUAL FORECAST Conservative
FEB – APR 2021 JUN – SEP 2021 Scenario
Case counts begin to decline Vaccinated and younger 0
consumers begin to resume
Phase 2 vaccine distribution ‘normal’ activities -10
-20
-30
JAN’21 – FEB’21 APRIL – MAY 2021 SEP 2021+
-40
Millennials and higher
Case counts stabilize. Vaccine becomes available Herd immunity begins
for everyone
income households
$900B Second Stimulus More consumers back to (new) -50 are likely to improve
passed @ 2020 year-end Vaccinated consumers ‘normalcy’ mobility the soonest
begin to resume ‘normal’
$1.9T Stimulus announced activities Certain habits persist at least -60
10/8/2020
11/8/2020
12/8/2020
10/8/2021
11/8/2021
12/8/2021
3/8/2020
4/8/2020
5/8/2020
6/8/2020
7/8/2020
8/8/2020
9/8/2020
1/8/2021
2/8/2021
3/8/2021
4/8/2021
5/8/2021
6/8/2021
7/8/2021
8/8/2021
9/8/2021
1/8/2022
2/8/2022
3/8/2022
4/8/2022
5/8/2022
6/8/2022
through 2021 (e.g., some work
Phase 1 vaccine distribution from home)
Source: CDC, RBC Capital Markets; Google Workplace Mobility, Mobility forecasts represent IRI Strategic Analytics POV.
© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 14The Channel’s Outlook Is Improving
Opportunities
and Operators Have Upside • Continued or increased
restriction on
Total Store – U.S. Convenience Channel restaurants and bars
Sum of Index • More road trips as
travel shifts away from
air travel, vacations
Optimistic near home
Scenario 107.6 • Changing needs for
103.6 convenience (late night
indulgence, food
delivery).
Base Case
Headwinds
102.8 103.0 103.0
• COVID-19 resurgence
or cold winter weather
can further limit
consumer mobility.
• Greater loss of low-
wage jobs.
YTD CY 2020 CY 2021
Source: IRI CPG Demand Index Forecast; Note: Forecast results based on data available as of 10/14/20. Mobility rates, additional federal stimulus, and economic recovery will impact forecast moving forward.
© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 15Mobility Changes the Impact of Millennials’ and
Higher Income Households’ CPG Spend Most
Consumer Cohorts Most Impacted by Consumer Mobility
% Change in Total CPG Dollar Growth Associated with 10% Decrease in Mobility1,2
Cohort differences driven by at-home vs. away-from-home
6.7
consumption: High income and younger cohorts shift more spend
to/from away-from-home consumption as mobility factors change
6.4
6.1 6.1
5.9 5.9
5.8
5.5 5.6 Ø 5.7
5.5
5.3
5.1
5.0
5.0 4.9
Generation Gen Z Millennials Gen X Boomers Seniors
Income Low Middle High Low Middle High Low Middle High Low Middle High Low Middle High
1. Based on linear relationship, excluding other factors.
Sources: IRI Strategic Analytics, Proprietary methodology for mobility elasticity. Based on IRI Shopper Loyalty data for 6.5M static households regularly shopping Grocery channel.
© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 16Once a Traffic Driver, Operators Must Invest to Rebuild Valuable Foodservice
Operations; Focus on New Daypart Solutions, Technology Solutions for Ease
High margin offerings including fountain sales, coffee, and baked goods took
a hit during pandemic due to temporary suspensions to implement new safety
protocols and dip in visits / traffic.
Operators can fight back by boosting customer service, including hiring
additional personnel to staff fresh food offerings; supporting in-store cleanliness;
offering curbside and drive-through fulfillment.
Operators should consider adopting new technologies to accommodate
online orders, curbside pick-up and even delivery.
Shift focus away from morning commute to different day parts to accommodate
work-from-home breaks and school-from-home breaks; evening.
For urban areas, factor in lost commuter traffic and focus on urban dwellers; in
suburban / rural markets, cater to larger populations working and studying from home.
Standout foodservice items should be available all day. Convenience built its
reputation on “all hours” operation, and even limited, but high-quality foodservice
items will drive traffic. Promote complementary items and even household essentials.
Pre-package food items into kits and bento boxes support in-home and
on-the-go dining. C&G stores have an opportunity to reignite America’s love
of road trips with signature offerings.
© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 17Convenience Retailers Focus Investments on Core
Value Proposition: Greater Convenience for Shoppers
NACS Retailer Member Pulse Survey* Provides a Glimpse of What’s in Store for Convenience Operators
21% 21%
have added added
curbside pickup contactless payment
14% 14%
focusing more
have added
on drive-thru delivery
The 7NOW delivery app aims to make
life easier and convenient for shoppers.
7-Eleven customers can order-in their
Enhanced Cleaning Protocols
favorite comfort foods at any time. Will Be a Part of Every
• Offered in 1,300 cities
Successful Store Operation
• Supports 60MM households and Survey Respondents
• Delivery in 30 minutes Indicate They’ll Make Cleaning
• October offers a “Free Hot Pizza” promo Efforts More Visible to Patrons
Source: https://www.cspdailynews.com/company-news/c-store-retailers-continue-see-mixed-results-2020; *Survey conducted in October 2020 among 72 NACS members companies representing 1,762 stores
© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 18There Are Multiple Paths to Drive Growth
Adopt New Technologies Shift Daypart Focus Leverage Loyalty Programs
-0.6% +6.1%
Right Assortment for Right Stores All Day Standout Food Service Items
Source: IRI analysis; C&G Retail, May – Aug 2020. *Store universe excludes “unassigned” clustered stores within scope of rural, suburban, & urban classification
© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 19SECTION 2
RBC Perspectives
© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 20EQUITY I RESEARCH An Inconvenient Truth: What Just Happened? February 2021 RBC Capital Markets, LLC Nik Modi, HPC, Beverages and Tobacco Analyst, (212) 905-5993, nik.modi@rbccm.com This report is priced as of market close February 3, 2021 EST. All values U.S. dollars unless otherwise noted. For Required Conflicts Disclosures, please see page 70.
Source: Google Images 22 RBC Capital Markets
The pace of change is accelerating
Year Years until
Developed Technology mass adoption
1872 Electricity 46
1876 Telephone 35
1897 Radio 31
1926 Television 26
1975 PC 16
1983 Mobile Phone 13
1991 The Web 7
2001 iPod 4
2006 Facebook 3
2007 iPhone 2.5
Source: RBC Capital Markets
23 RBC Capital MarketsCOVID = forcing change Source: RBC Capital Markets 24 RBC Capital Markets
The Very Nature of Convenience is
Changing
25 RBC Capital MarketsLatin root: Conveniens
“to be suitable”
26 RBC Capital MarketsSuitable is not good enough anymore 27 RBC Capital Markets
So what does all this mean for
C-stores?
28 RBC Capital MarketsProbably some more of this…
2.0% Y/Y Chg. in # of US Convenience Stores
1.4%
1.5%
1.2% 1.2%
0.9% 0.9%
1.0%
0.7%
0.5% 0.3%
0.2%
0.0%
-0.5% -0.3%
-1.0%
-1.1%
-1.5%
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: NACS
29 RBC Capital MarketsLess traffic Source: Google Images 30 RBC Capital Markets
Social unrest Source: Google Images 31 RBC Capital Markets
The biggest issue: failure to adapt Source: Google Images 32 RBC Capital Markets
And this does not count as adapting… Source: Google Images 33 RBC Capital Markets
Remember this? Source: Google Images 34 RBC Capital Markets
What could “normal” look like
Homebody? Source: IRI, RBC Capital Markets 36 RBC Capital Markets
Is staying at home more a
new phenomenon?
37 RBC Capital MarketsHere’s some data on the “home channel” as of 2018 (pre-COVID)
Games and Puzzles Video Games
3% growth over Top growing
same period last industry at NPD,
year +18% vs. LY
Sweats and
Barware Tools
Sleepwear unit
and Sets
sales +9% over
+52% vs. LY
LY
Source: The NPD Group/Consumer Tracking Service, 12ME Mar ‘18; Retail Tracking Service, 12ME Mar ‘18
38 RBC Capital MarketsNeed some more evidence? One 2018 paper, published in the journal Joule, found that Americans between the ages of 18 and 24 spend 70% more time at home than the general US population. In another 2018 survey, conducted by the marketing research firm Mintel, 28% of millennials between 24 and 31 said that they preferred to drink at home because going out was too much effort, compared to just 15% of baby boomers who agreed with that statement. Source: Joule, Mintel, RBC Capital Markets 39 RBC Capital Markets
Why? 40 RBC Capital Markets
1) People are burnt out
A survey of more than 300 companies in the US and Canada found nearly 2/3 of employers were demanding
longer hours of their employees than they did three years prior.
Roughly half said they expected the longer hours to get even longer over the next three years.
In the U.S., 85.8% of males and 66.5% of females work more than 40 hours per week.
Source: Business Insider
41 RBC Capital Markets2) Even on the couch, people are more “connected” than ever before. Facebook has 2.7B monthly active users – more than the population of
the US and China combined
3.0 Facebook Monthly Active Users 30%
2.5 25%
2.0 20%
1.5 15%
1.0 10%
0.5 5%
0.0 0%
Jun-14
Dec-14
Jun-15
Dec-15
Jun-16
Dec-16
Jun-17
Dec-17
Jun-18
Dec-18
Jun-19
Dec-19
Jun-20
Sep-14
Sep-15
Sep-16
Sep-17
Sep-18
Sep-19
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
Monthly Active Users (in billions) Y/Y Growth
Source: Company Reports, Google Images.
42 RBC Capital Markets3) It’s scary out there! Source: Google images 43 RBC Capital Markets
It took 20 years for e-commerce to reach 11% penetration. In the past 6 months it’s jumped over 6 pts
18%
E-commerce Penetration as a % of Total Retail Sales 6 16.1%
16% months
20 years
14%
12% 11.0%
10% 9.1%
7.3%
8%
5.9%
6% 4.9%
4.0%
3.4%
4% 2.5%
1.8%
2% 1.1%
0%
2Q'20
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Source: US Department of Commerce, RBC Capital Markets
44 RBC Capital MarketsIt’s only going to get more profound 45 RBC Capital Markets
Same-day/1-day coverage for Amazon in 2014… Source: RBC Capital Markets, RBC Elements, Amazon website 46 RBC Capital Markets
…in 2015 (expanded coverage areas in black) Source: RBC Capital Markets, RBC Elements, Amazon website 47 RBC Capital Markets
Rapid growth of Amazon’s fulfillment capacity, 2014-2018 Source: RBC Capital Markets, company reports 48 RBC Capital Markets
Same-day/1-day coverage for Amazon in 2016 (expanded coverage areas in purple) Source: RBC Capital Markets, RBC Elements, Amazon website 49 RBC Capital Markets
Same-day/1-day coverage expansion in 2017 was exponential (expanded coverage areas in green) Source: RBC Capital Markets, RBC Elements, Amazon website 50 RBC Capital Markets
Then came the locust swarm in 2018 (expanded coverage areas in maroon) Source: RBC Capital Markets, RBC Elements, Amazon website 51 RBC Capital Markets
Today - In 17 states (incl. DC), almost all (95%+) households have access to same-day or next-day Amazon delivery
Connecticut 100.0% Oregon 86.8%
Delaware 100.0% Minnesota 74.0%
District of Columbia 100.0% Wisconsin 72.3%
Florida 100.0% Illinois 72.0%
New Jersey 100.0% Nevada 71.3%
Georgia 100.0% Washington 70.6%
North Carolina 100.0% New York 66.9%
South Carolina 100.0% Ohio 66.3%
Indiana 99.9% Oklahoma 45.2%
Rhode Island 99.9% Colorado 40.4%
Virginia 99.9% Utah 35.0%
New Hampshire 99.9% Kansas 31.3%
Massachusetts 99.6% Kentucky 25.6%
Maryland 98.2% Tennessee 21.8%
Arizona 95.7% West Virginia 13.7%
Texas 95.3% Missouri 10.3%
California 94.6% Iowa 3.1%
Pennsylvania 88.9% Michigan 2.2%
We estimate ~72% of the total US population now has access
to same-day or next-day delivery.
Source: RBC Capital Markets, RBC Elements, Amazon website, Census Bureau
52 RBC Capital MarketsAmazon has patents for drone delivery from a blimp.. But that won’t happen anytime soon, right? Source: CNBC 53 RBC Capital Markets
But that won’t happen anytime soon, right? 54 RBC Capital Markets
Amazon will be shipping packages via drone in a matter of months Source: Forbes, Amazon 55 RBC Capital Markets
Wrong, it’ll be here sooner than you think
Source: Google Images
56 RBC Capital MarketsMeet Moby—the 24-hour mobile convenience store that travels to the consumer or can be transported
easily without staff – currently being tested in Shanghai
Source: Moby
57 RBC Capital MarketsYeah, but that’s Shanghai… totally different market 58 RBC Capital Markets
Robomart can be hailed using an app and is currently operating in West Hollywood Source: Roboticstomorrow.com 59 RBC Capital Markets
Uber testing McDonald’s drone delivery… Source: Uber, Techcrunch 60 RBC Capital Markets
Here’s Ford’s solution to “the last 50 feet” Source: Ford, Bloomberg 61 RBC Capital Markets
Have you met FedEx SameDay Bot?
Retailers on board for initial testing:
Source: FedEx, Fortune
62 RBC Capital MarketsNuro, founded by former Google engineers, will focus on the last mile: groceries, laundry, packages, take-out, etc. Source: Roboticstomorrow.com 63 RBC Capital Markets
Are you ready for this? Source: Google Images 64 RBC Capital Markets
Samsung recently won a patent for smart lenses that can display anything, anywhere based on your
preferences
Source: Patentlyapple.com, RBC Capital Markets
65 RBC Capital MarketsHow about this?
Walmart and Amazon are looking to introduce virtual/augmented reality shopping.
Source: Yellrobot.com, RBC Capital Markets
66 RBC Capital MarketsMark Twain was a wise man – “History may not repeat, but it does rhyme” Source: Google Images, RBC Capital Markets 67 RBC Capital Markets
The Very Nature of Convenience is
Evolving
68 RBC Capital MarketsSo shouldn’t the convenience store
industry evolve as well?
69 RBC Capital MarketsRight now these 3 items are the largest contributors to C-store traffic Source: Google Images 70 RBC Capital Markets
We’ve known that the gas and cigarette categories are in structural decline, but up until now you’ve had the option to kick the can down the
road
US Industry Volume Y/Y
0.0% 0.0% 0.0%
0.0%
-1.0% -0.5%
-1.0% -1.0%
-2.0%
-3.0% -2.5%
-3.0%-3.0% -3.0%
-4.0% -3.5% -3.5% -3.5% -3.5%
-5.0% -4.5% -4.5% -4.5% -4.5%
-5.0%-5.0%
-6.0% -5.5% -5.5%
-6.0%
-7.0%
4Q'14
1Q'15
2Q'15
3Q'15
4Q'15
1Q'16
2Q'16
3Q'16
4Q'16
1Q'17
2Q'17
3Q'17
4Q'17
1Q'18
2Q'18
3Q'18
4Q'18
1Q'19
2Q'19
3Q'19
4Q'19
1Q'20
2Q'20
Total Domesic Industry Volume Y/Y 2-Year Average Historical Average
Source: McKinsey, Company Filings, RBC Capital Markets
71 RBC Capital MarketsA portion of the US workforce will continue to work remotely either part or full time – meaning less time spent commuting (more time available
to prepare meals) and the potential to transfer at least some of the weekly lunch occasions in home
A recent survey of 317 CFOs suggests 74% have plans to permanently shift at least a portion of
their workforce to remote work; 13% of CFOs have already cut real estate expenses with another
9% planning cuts in the months to come.
What percentage of your workforce will remain permanently remote post-
COVID who were not remote beforehand?
30%
27%
26%
25%
25%
20%
17%
15%
10%
4%
5%
2%
0%
0% 5% 10% 20% 50% >50%
Source: Gartner, press release April 3, 2020
72 RBC Capital MarketsMaybe it’s time to transition from “just in time” to “just in case” Source: Google Images, RBC Capital Markets 73 RBC Capital Markets
“Judy” quick evacuation kits in the Southeast during hurricane season or in the west during forest fire season? Source: Judy, RBC Capital Markets 74 RBC Capital Markets
Maybe you have more space than you think… Source: Cartstack 75 RBC Capital Markets
Seek unique partnerships
Source: Kroger/Walgreens, RBC Capital Markets
76 RBC Capital MarketsKroger produce, meat, eggs, milk and more to select Walgreens locations Source: Kroger/Walgreens, RBC Capital Markets 77 RBC Capital Markets
Walgreens health and beauty at Kroger Source: Kroger/Walgreens, RBC Capital Markets 78 RBC Capital Markets
After all, you have the advantage from a geographical/frequency standpoint
# of Mass Merchandise
# of Convenience Stores in US
Retailers in US
152,720
8,329
Source: NACS, Statista, RBC Capital Markets – NOTE – Mass stores defined as Wal-Mart + Target + Amazon + Costco
79 RBC Capital MarketsIs technology the solution? At least half of frequent C-Store shoppers want more digital offerings, including automated check-outs and ordering online Source: Statista 80 RBC Capital Markets
Most people are misguided in believing that the checkout (or lack thereof) is the disruption…
Source: Google Images, RBC Capital Markets
81 RBC Capital Markets…when in reality it is this Source: Google Images, RBC Capital Markets 82 RBC Capital Markets
A combination of artificial intelligence, computer vision, and data pulled from multiple sensors Source: Google Images 83 RBC Capital Markets
What does this mean? They will know your: Your purchase history What time you enter the store and leave What items you picked up and for how long you held each product How many times you came back to an item What areas of the store you spent the most time in How promotions affected your basket What brand clothes, hats, shoes you wear 84 RBC Capital Markets
Suddenly this doesn’t seem hard to imagine…
Your Cart:
• Charcoal
• Hot Dogs
Your Promotions:
• $1.00 off ketchup
• $0.30 off relish
• $1.65 off mustard
Source: Google Images, RBC Capital Markets
85 RBC Capital MarketsImagine.. Being able to offer different promotions to different people based on all of this accumulated data Being able to avoid giving promotions to customers who would have bought the product anyway at full price Knowing the likelihood that these personalized promotions will influence a consumer to buy Having visibility into top and bottom lines 86 RBC Capital Markets
Category Level Lightning Round
Beverage Alcohol, Tobacco, Candy/Confection/Snacking, Food Service
Beverage Alcohol
− Need to go all in on hard seltzer
− Uncork the wine opportunity – partner with food service
− Shoppers are moving to other channels to buy beverage alcohol…will larger pack sizes help?
Tobacco
− Is “white nicotine” the hard seltzer of the tobacco category?
− Low income consumers negatively impacted by COVID more than the average consumer
− Excise taxes are a risk
Candy/Confection/Snacking
− Rethink pack size assortment (more larger bags)
− Occasion-based kits (smores, movie night, seasonal, etc)
− Leverage candy/confection category to be the dessert option for food service business
− Do you really understand consumption patterns across the entire snacking wheel (could free up space that could
be more productive)?
Food Service
− Capitalize on the near-term opportunity of orphaned restaurant spend
− Upgrade the menu/packaging – start building the food service brand NOW (leverage this window of opportunity)
− Partner with local restaurants that are struggling due to the pandemic
− Invest in digital assets (owned apps)
88 RBC Capital MarketsRequired Disclosures
Conflicts Disclosures
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correspond to Buy, Hold/Neutral and Sell, respectively, the meanings are not the same because our ratings are determined on a relative basis.
89 RBC Capital MarketsRequired Disclosures
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91 RBC Capital MarketsSECTION 3
Crossmark Perspectives
© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 92INTERSECTION OF RETAILERS, DISTRIBUTORS AND CLIENTS
932021 – A REPEAT OF 2020?
Current Trends
In-Store Updates
• Delays in Schematics, Resets
• Focus on the Core Business – Staying In-Stock
• Focus on PPE
• Ensuring Employee/Customer Safety
942021 – A REPEAT OF 2020?
Current Trends
Compliance with Federal and Local Mandates
Social Distancing = Fewer Displays In-Store
Limits on Foodservice Offering = Lower Volume
Cleanliness and Sanitation = Increased In-Store Labor
Store Closures and/or Reduced Store Hours
952021 – A REPEAT OF 2020?
Current Trends
Slower than Normal Business Process
• Annual Business Agreements
• Innovation Acceptance
• Program Activation
• Reduced Resources/Admin Support
• Product Mix/Profitability
• Unpredictable Cash Flow
• Steady Supply Chain
962021 REASONS TO BELIEVE
Resiliency of the Convenience Channel
Weather, Social Disruption, Natural Disasters, The Economy, Regulations and Energy
Retail Chains
- Innovation
• E-Comm – Expanding App Capabilities
• Self Check-out
• Contactless Commerce
• Delivery
• Curb-side Pick-up
972021 REASONS TO BELIEVE
Resiliency of the Convenience Channel
Weather, Social Disruption, Natural Disasters, The Economy, Regulations and Energy
Distributors
- Virtual Trade Shows
Independents
- 100,406 Single or Multi-Unit Owners
- Working to serve their local communities
98QUESTIONS
&ANSWERS
© 2021 Information Resources Inc. (IRI). Confidential and Proprietary. 99Contact Us
Krishnakumar (KK) Davey Nik Modi Jeff Neihart Kennith Fries
President, Managing Director, Beverages, Vice President & GM, Vice President,
Strategic Analytics Tobacco & Household Personal Care Client Development C-Stores
IRI RBC Capital Markets Crossmark Crossmark
Krishnakumar.Davey@iriworldwide.com nik.modi@rbccm.com Jeff.Neihart@crossmark.com Kennith.Fries@crossmark.com
(732) 713-3446 (212) 905-5993 (469) 814-1232 (469) 331-4461
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