Great strides have been made within the last year to introduce new tobacco products that would, from my perspective, reduce harm when compared with traditional cigarettes. I must say, though, that I would have never thought the quest for harm reduction would be besieged with so much controversy and ignorance.
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The term “blessed” is trite but, in this case, true: My journey through the convenience store industry has seen me blessed with the friendships of so many special people. More than a few of them fit the mold reserved for greatness. I’d like to share some of the wonderful wisdom I’ve learned from them.
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Increases on cigarettes have put the category’s long-term viability in jeopardy.
By Jim Callahan, Convenience Store Solutions
I recently saw a statistic that declared tobacco was no longer king in convenience stores. While that is not yet true for most of us, it’s about to become an indisputable fact.
The entire country now gets to enjoy the extra $6.10 per carton federal tax. Now my home state of Georgia is not satisfied with its measly $3.70 per carton tobacco tax and is keen on following the feds lead. The state has a bill pending that would raise the carton tax an additional few bucks. Is this not a great country!
As if retailers and wholesalers won’t be hurt enough by the federal tax hike, the states that are increasing taxes are creating a bootleggers dream for all the neighboring states with a lower tax. We find ourselves as mere pawns in this race to eradicate tobacco from store shelves.
With apologies to JR Robertson and The Band, the lyrics of their ever familiar 1970 folk standard, “the night they drove old Dixie down” seemed made to be bent around the predicament retailers and wholesalers are facing with tobacco, except now it should read, “the night they drove cigarettes down, and big tobacco’s registers were singin’ and all the politicians were singin’, ha, ha, ha …”
Don’t get me wrong, I see the role government plays in reducing the health risks inherent with using tobacco products and I understand the mounting financial pressure tobacco companies are under as they pay the piper under the 1998 MSA. What I don’t understand is both sides–in their haste to cover financial shortfalls–seem to have forgotten the very vehicle that does the grunt work: the 144,000-plus proud convenience stores and the handful of dedicated wholesale grocery suppliers.
Retailers Need Help
Over the last few years big tobacco has reduced “buy downs” as a way of cutting retailers and grocery wholesalers out of critically needed inventory appreciation. Where’s the extra money to replace inventory to come from? Whole dollar increases leaves all but big tobacco in the unenviable situation of paying higher inventory replacement costs without means.
Last month Philip Morris led the way, followed closely by Lorillard & RJ Reynolds with a mammoth $7-plus dollar a carton increase. This was quickly followed by rumblings that the increase “might” include the new federal tax increase. Even if the increased tax is included in the new price, big tobacco according to my calculations amassed an astounding $369 million dollars during the 20 days that led up to April 1. The feds yearly take will be close to $6 billion, and they both left us only the shells the peanuts came in.
Using allocations to limit supply and waffling on whether the tax is or isn’t included in the price increase created the demand. Wholesalers and retailers can’t help but feel used and resentful as they dance to this suddenly sour song. No one can fault big tobacco for using survival skills to stay in business, but history will fault the tobacco companies for all but forgetting their loyal partners as all parties are struggling to cope with reduced tobacco sales and profits in the worst economy in 50 years.
Federal and state governments, under the guise of healthcare concerns have found tobacco a guilt-free vehicle to cover pork barrel spending short falls as they race to see how much the poor smoker will tolerate before they become smoked out. We fault not what you are doing rather the way you did it.
About the Author
Jim Callahan has more than 40 years experience as a convenience store and petroleum marketer. His Convenience Store Solutions blog appears regularly on CSDecisions.com. He can be reached at (678) 485-4773 or via e-mail at jfcallahan502@msn.com.
This one’s personal.
As the saying goes, this is not my first rodeo, but amazingly I’ve come through with very few of life’s saddle sores. Now in my 40th year in the industry, I’ve worked for some amazing people, learned many valuable lessons, earned a bunch—thanks to several great companies—and made it through the tough times with a little help from my friends.
That old axiom “fall back, spring ahead” takes on an entirely new meaning for 2009. Faced with the worst recession in more than half a century, springing ahead means fighting for survival for most of us who are trying to navigate the stormiest weather this industry have ever seen.
And in case you haven’t noticed, it’s not just small operators. Caught square in the apex of this rare, if ever-before-seen economic “Bermuda Triangle” are highly successful, well-run companies like Flying J and many others. Suddenly, the industry isn’t so recession-proof.
What leg of the triangle does one attack first? Shameless and recently bailed-out banks are no longer willing to make loans to longtime customers with great track records. Does the term “pulling the rug out from under you” mean anything? Then there’s the illusionary futures market that has all of us wondering which way fuel prices will go. What’s left is the third leg: improving operations. This is no doubt a tough task, but of the three it’s the one that convenience store owners have the most control over.
To operate more efficiently operators are advised to:
• Get a handle on expenses. Be willing to make the tough decisions. Examine every line on that P & L and know what makes up the line. Can it be justified? Should it be justified?
• Force yourself to sell off nonperforming assets and take aim at underperforming stores. Certainly it’s a poor time to get a great price on these assets, but ask yourself, “Can I afford to carry this asset in this business climate?”
• Spring ahead with a well thought-out plan to maximize sales. Make every effort to keep fuel competitively priced in order to drive more customers inside the store. Once they’re in, “wow” them with outstanding service.
This economy demands constant and meaningful specials for customers. “Two-fers” allow a larger ring while affording customers value. Be sure to involve your vendors. If you’re slow, so are they. Go the extra mile and don’t fail on the small things. Image is paramount!
• Make a full commitment to foodservice—the industry’s brightest minds say you can’t survive without it. Involve your grocery wholesaler in your plans. They have great information, ideas and contacts. Operators like Sheetz, Wawa and QuikTrip have raised the bar for us and customers no longer consider c-store food a secondary option. Ride their coattails.
Also remember customers like one-stop shopping, and they rely on quick, inexpensive meals. No one is in a better position to accommodate them than we are. Explore options like creating a snack deal that might include a Coke and a Reese’s candy bar, or coffee and a doughnut. A meal deal can be as simple as a hot dog, a bag of chips and a fountain Pepsi. If you’re already doing this, explore ways to improve it. Generate some excitement like using a fan to send the scent of fresh pizza from your ovens throughout the store at mealtime, offering product samples and developing new point-of-purchase displays—anything to get customers’ attention. If you’re not already in foodservice don’t wait until the storm subsides.
• For those still in good financial shape, there will be many opportunities for growth. Keep a nest egg and make it a point to know the up-to-the-minute thinking of your bankers’ bosses before making any acquisitions. Show restraint and act only on the best opportunities.
Above all, keep a positive attitude and let it shine through for all to see. And remember, when things are going bad it’s never as bad as it seems, just as when things are going good it’s never as good as it seems. Don’t lose sight of the fact that after most every rough storm, there is indeed a rainbow. Best of luck finding yours.
Jim Callahan has more than 40 years experience as a convenience store and petroleum marketer. His Convenience Store Solutions blog appears regularly on CSDecisions.com. He can be reached at (678) 485-4773 or via e-mail at jfcallahan502@msn.com.
Things have been quite difficult for most Americans this holiday season. There have been thousands upon thousands of job layoffs, though the retail sector has weathered much of the storm relative to other industries such as the financial sector, which has taken a huge beating. As I reflect on the economy’s state of turmoil, one sign of the times changing for the better crosses my mind: 2009 begins Barack Obama’s tenure as the 44th president of the U.S.
Like the nation, the convenience store and petroleum industry has seen many changes over the years, good and bad. Looking at the convenience store industry with a glaring eye, thisindustry, relative to many others, can stand to see some new changes that are more reflective of the global landscape in which we live.
As an African-American female, I definitely have experienced a lot of firsts. I was the first in my family to graduate from high school and attend college. I was the first in my high school to win the U.S. Army’s Scholar-Athlete medallion. I was the first in my family to move out of my home state of South Carolina and actually venture outside of the South into “Northern” territory. I was also the first to fly when I relocated to Green Bay, Wis., to work in the corporate recruiting sector, and I was the first to go to law school. You see where I am going with this.
As a Generation Xer, I have never felt quite content with being a first. It’s always seemed that I should have been a lot further in the sequence in many instances. While many African-Americans are pleased Barack Obama was elected president, many also feel it should have happened much sooner, though some are surprised they’re living to see it happen at all.
Obama’s entry into the race and his road to the presidency was certainly a surprise given his relative infancy in the Senate. This man appears destined for greatness and it will take a great leader to unite a country that is desperate for economic relief.
New Direction
Expect Obama to guide the nation under a foundation of hope and change. With his inauguration just around the corner, consumers are already experiencing some relief in the gas prices and fuel margins are strong in many markets. If you ask some, they’re optimistic we could begin seeing signs of reversal in the economy in the first quarter of 2009 and remain hopeful that within the next 12 months the turnaround will be even more evident.
The convenience store industry is without a doubt a conservative domain in its practices and procedures. The industry is currently battling outrageous credit card fees, high tobacco taxes and it’s looking for some relief from Congress. Industry professionals will be watching closely to determine whether Barack Obama is an enemy or an ally; though some have already made up their minds based solely on his political ideology. This presidency will clearly be scrutinized by the c-store industry, as it should be by all business professionals who have an awful lot to lose in these trying economic times.
However, the fact remains that the industry’s consumer base contributed significantly to Obama winning the election. Instead of battling a political ideology, the industry might be better served learning more about these customers and what they want in this “new America.” Clearly, millions in sales dollars—or, perhaps, even our very survival—depends on understanding who these consumers are and what they want.
So while many in the industry may be singing the c-store blues, remember the only tune that matters is your ability to drive customers and build new business.
Tonya Brown is a business manager for The Pantry Inc./ Kangaroo Express Stores in Sanford, N.C. She can be reached at (843) 364-8417 or via email at tonyab33@gmail.com.
Surfing through the TV channels recently, I paused to watch a few minutes of the popular Antiques Road Show program. I was amazed at the value we place on antiques in this country, how they appreciate with time. Indeed, the older they get, the more they’re valued.
Certainly you’ll agree that we’ve all been guilty of trashing some pretty valuable items during house-cleaning occasions, be it old comic books, furniture and such. My guilt centers around discarding my father’s mortar, pestle and scales after he retired from the pharmacy business.
This set me to wondering about the “antique human assets” that we live and work with, how we should look at them in a whole new light. I know, the hair is thin and the torso isn’t; bifocals adorn wrinkled faces; and have you noticed the gait and memory aren’t quite as quick? On the flip side of that same record (whoops, dating myself again), the great majority of seniors have firsthand experience with events that most people have only read about. Their pride, discipline, work ethic and vast store of knowledge will wow you. They’ll show up on time, they’re eager to do a good job and they consider sick days merely as an added bonus.
Older is Wiser
Perhaps a few well known examples can set the stage for some personal favorites of mine.
Winston Churchill became England’s Prime Minister at age 66 and led his country through World War II, when he was well into his 70’s. Ronald Reagan restored pride in the U.S. in the 1980s while he, too, was in his 70’s. And Benjamin Franklin was Postmaster General at age 82.
So just when is it too late for older workers to keep achieving? Obviously, the answer comes on a case-by-case basis, but don’t be guilty of judging an old book by its dusty cover. I called my sister in Upstate, N.Y., last month and she answered the phone quite out of breath. Concerned, I said, “What’s wrong Pat?” She replied, “I just got off the ski slopes and had to run to get the phone!” Did I fail to mention Pat is 73? A major inspiration in my life, she’s a retired school teacher who went on to become a registered nurse at age 65. Eight years later, she still works full time and overtime, not because she has to but because she wants to.
I work with a 73-year-old who has an absolute passion for improving our store image and who does an excellent job getting things done right. A great buddy of mine from my AMA days was named “Rookie of the Year” in his softball league at age 71. New York Association of Convenience Stores Hall of Famer Bob Seng, now in his 80’s and the subject of Convenience Store Decisions “Legends in Retailing” this month (see p. 20), is busy writing a book. He volunteers for SCORE and works part time to keep busy, and he remains as sharp as that proverbial tack.
The list goes on. In my eyes, the most amazing employee Wal-Mart has is an 81-year-old lady who takes care of the health-and-beauty section of a store in Georgia. She is amazingly spry and keeps the entire section flawless. My point by now is obvious. Take a minute to look around your company—or at your job candidates—and see if you don’t recognize a few antiques to appreciate. They’re dedicated, educated teachers committed to doing a great job. In other words, their presence is priceless.
Jim Callahan has more than 40 years experience as a convenience store and petroleum marketer. His Convenience Store Solutions blog appears regularly on CSDecisions.com. He can be reached at (678) 485-4773 or via e-mail at jfcallahan502@msn.com.
Often I am asked what I would do if I was a tobacco category manager today as I peered into the future. Simply, I would practice good sound category management. I would look at what products meet my consumer’s needs in the future and aggressively embrace the opportunities that change brings to my business. Read the rest of this entry »
As we usher in a new year, let patience be your guide to achieve personal and professional goals.
What if you suddenly found out that your slate could be pretty much wiped clean and most all of the tactical mistakes made could disappear? What if you could be convinced that you were going to be given a golden opportunity to correct some flaws that have hindered your success a bit? Read the rest of this entry »
Retailers must embrace the many new opportunities offered in the tobacco category.
The current and future tobacco category will present new challenges that retailers will need to embrace if they are to succeed. As each convenience store retailer looks at the future of their tobacco business, there is one thing that is certain and that is change. Each needs to ask what the future holds for their business. Cigarette consumption will continue to decline as legislative actions continue to restrict smoking. But what does this mean for your business. What will you do at your business to continue to bring in the profits in these changing times?