The biggest chain you've never heard of is expanding

OK, maybe you have heard of them if they're one of your customers, or if you live in a small midwestern town, but most folks don't know about Casey's General Stores.

Casey's is headquartered in Ankeny, Iowa, and runs 1450 convenience stores in nine states, mostly in towns of 5000 or less population.

They're planning to grow that store count, as well as increase and upgrade store size. The upgrades are the sort of things many c-stores have been adding -- expanded coffee selection, prepared foods, nicer decor, and est-in facilities in some locations.

In terms of a timeframe, the company intends to open 20 to 25 new stores in this fiscal year, which for Casey's ends April 30. In addition to that projection, the chain will replace another 20 stores with the new design and take 10 additional stores and put those locations through the remodel process. In the end, the chain will have 50 to 55 stores operating with the new look by next spring.

Though refraining from specifics about the markets where these new sites will go, Walljasper said the model fits both in rural sites and its larger markets, but may not be right for smaller towns of, say, 500-600 residents.

The larger goal is to grow the company's store base by 4% each fiscal year, despite today's economic challenges. "We're not necessarily pulling back new-store construction or our search for acquisitions due to the challenges in the economy," said Walljasper. "In the Midwest, we have benefited from a robust economy because agricultural areas have done relatively well."

Exxon quitting the retail biz

Exxon Mobil is selling of the last of its company-owned gas stations to distributors.

Motorists, however, will continue to see Exxon's Tiger-themed stations and Mobil outlets in their neighborhoods. Already, about 75 percent of Exxon Mobil's roughly 12,000 stations in the U.S. are owned by branded distributors, who buy Exxon Mobil products and pay to use the name.

Irving-based Exxon, the world's biggest publicly traded oil company, said it now plans to sell to distributors its remaining 820 company-owned stations and another 1,400 outlets operated by dealers.

There's practically no profit in selling gasoline at retail. The narrow margins tend to be eaten up by credit card fees.

Most gasoline retailers long ago got past any illusion they can make money by selling gas. They rely on gas sales to drive traffic to their shops, where they hope auto repairs or food and drink sales will help them turn a profit.

C-stores sales rise, profits drop

This press release from the National Association of Convenience Stores has some interesting stuff in it.

Sales were up last year, to $577 billion. Although that was only a 1.4% increase, the channel more than tripled sales, from $174 billion, in the ten years from 1997. Pretty impressive.

Pretax profits dropped from $4.8 billion to $3.4 billion (which is only a bit over 0.5%). Not so impressive. The NACS points out that rising credit card fees account for most of the profit drop. Fees were up $1 billion, to $7.4 billion -- more than double the profit figure.

Lots of interesting stats, in case you're wondering how your local Kwik-E-Mart makes its money. (Hint: It isn't from gas -- gross margins are ten cents a gallon).

Ethnic targeting at the C-store

Circle K is launching a program to carry a range of Hispanic items in their convenience stores.

The Authentic Hispanic program offers various planograms including complete 4-foot and 3-foot dry grocery food and HBA displays of over 70 SKUs along with 10 beverage SKUs in the refrigerated section. The program features the most popular Hispanic brands such as Jumex, La Costena, Hershey Lorena, Nestle, El Azteca and more.

It sounds like a great idea. The logistics seem iffy, though. The whole idea of a c-store is to have a very small range of very high-volume items at high margins. To add into their distribution chains another sub-set of items that either go into only some stores or, alternatively, go into stores where they won't sell, will present difficulties.

It will be worth watching.

Another high-end c-store?

Tesco hasn't even arrived in the US, and already they have competition in their chosen niche -- from a group that crossed the Pacific before they could cross the Atlantic. FamilyMart, a Japanese company with 10,000 convenience stores in Japan, South Korea, China, and Thailand, has opened two "premium" c-stores in California and plans to have 250 by 2009.

The stores have been opened under the Famima banner and promise to bring a new community lifestyle experience to the west coast, offering a cross between delicatessen, quick-service restaurant and traditional convenience store.

The shops also provide a banking service, a stationary department, newsstand and internet terminals. And they stock fashionable Japanese delicacies, such as sushi, noodles and a selection of imported groceries to appeal to middle-income shoppers.

Tesco hasn't spelled out its own plans, but most analysts think they will be going for a similar high-end niche with stores of about 5000 square feet or less. Previous comments on Tesco's plans are here, here, and here.

Tesco's entry into the US already looked interesting -- this could make it more so. Are analysts correct in thinking this is the market Tesco is going after? And, if so, is it big enough to support two entrants, one of which has a good head-start on Tesco?

This will be fun to watch.

Tuesday Update: The Sunday Times ran an interesting piece outlining how Tesco approaches foreign markets. I suggest you read the whole thing -- there's too much info in it to adequately summarize it here. But the gist is that they initially use joint ventures to get to know the market (which they aren't doing in the US), they adapt to local customs and tastes, and they give local management great freedom.

“You cannot manage people on a day-to-day business. Leadership has to be in the hands of local people. You need strong leadership teams on the ground that carry the ethics and values of Tesco,” he said.

Home Depot c-stores?

Home Depot may be worth a separate blog, with the number of posts about them lately. Now they're talking about getting into the convenience store business.

I don't think I understand this one.

Analyst Bill Sims with Smith Barney said some retailers use gasoline as a loss leader and a way to drive traffic into their stores.

"If Costco's doing it, and Wal-Mart's doing it, why not Home Depot?" Sims said. "I would think it would be a great traffic driver and more of a one-stop-shop."

Excuse me if "Costco's doing it, and Wal-Mart's doing it" doesn't strike me as great logic. Remember your mom saying, "If Billy jumped off a cliff, would you do it?"

Okay – it’s not that bad, but it still sounds strange to me.

I see c-stores as being a great place to pick up a loaf of bread and a gallon of milk, not a loaf of bread and a gallon of paint, which is what the “one-stop shop” part of the argument seems to envision.

Still, in one limited aspect I can see the logic, and that is as a tie-in with their foray into the professional market. I guess I can see builders drinking coffee and buying donuts in the morning as they wait for their orders to be loaded. Still, that seems a weak foundation on which to build a c-store business.

But I could be wrong.