Exclusive: The Year in Convenience Stores
Published in CSP Daily News
The industry stories that made 2013 memorable
OAKBROOK TERRACE, Ill. -- 2013 turned out to be a year of retailer scandals, unpredictable acquisition activity and drama in product categories that kept the convenience store industry on its toes. As we prepare to turn our calendars to 2014, CSP Daily News offers this collection of the year's top stories.
The largest convenience store chain in the country, 7-Eleven Inc., was in the spotlight midyear when nine of its franchisees in New York and Virginia were charged with conspiracy to commit wire fraud, concealing and harboring illegal aliens for financial gain and aggravated battery, among other infractions. Not helping the matter was a separate civil action in which 7-Eleven itself accused franchisees and employees, key among them former chairman of the National Coalition of Associations of 7-Eleven Franchisees Tariq Khan, with racketeering, fraud, breach of contract and trademark infringement. As the year wraps up, both cases continue to wind their way through the legal system.
Meanwhile, the sixth-largest privately owned company in the country, Pilot Flying J, saw several of its employees arrested in a scam that allegedly bilked truckers out of millions of dollars. The Knoxville, Tenn.-based truckstop company has been the subject of intense scrutiny since April 15, when agents of the FBI and the IRS raided its headquarters, and seized documents, emails and computer files. Authorities have accused Pilot Flying J sales staff a scheme to defraud trucking-company customers that buy diesel at its more than 650 truckstops by shorting rebate money Pilot owed them. Settlement agreements have been reached with several of the trucking firms, but we expect news from this scandal to extend well into 2014.
While the courts reached what they felt was an equitable agreement on credit- and debit-card fees this year, many retailer opted out of the settlement, keeping the door open for continuing litigation of just how much the lenders deserve of sales made in retail shops. As recently as this month, Visa and MasterCard won approval for a $5.7 billion deal over allegations that credit-card swipe fees are improperly fixed. NACS and other retail organizations, however, have said they will appeal the decision.
Obamacare remains a thorn in many business-owners sides as they decide whether to pay for coverage for its full-time employees or turn them into part-timers. The convenience store industry has had retailers on both sides of the fence. Meanwhile, as various deadlines in the Affordable Health Care Act come due, many retailers are trying to work out details.
Mergers & Acquisitions
Several major industry names saw joined forces in 2013 even as Master Limited Partnerships became a new major outlet for company spinoffs. Among those that made moves:
- In November, in a deal mainly intended to expand its refinery presence, but which includes the SuperAmerica downstream network, Western Refining Inc. purchased ACON Investments' (ACON) and TPG's ownership interests in Northern Tier Energy LP for a total consideration of $775 million. This came after Western Refining completing a master-limited-partnership spinoff in October called Western Refining Logistics LP.
- Also in November, Susser Holdings Corp. and Susser Petroleum Partners LP acquired 47 convenience store and 65-million gallons of motor fuel distribution contracts of Sac-N-Pac Stores Inc. and 3W Warren Fuels Ltd.
- In October, Sunoco's purchase, through an affiliate, of the 300-store Mid-Atlantic Convenience Stores (MACS), demonstrated that consolidation and surprising strategies are still in play within the convenience-retail channel.
- Meanwhile, numerous retailer names have been raised as possible buyers of Hess Corp.'s retail assets. New York City-based Hess earlier this year outlined a plan to slim down and focus on finding and extracting oil and natural gas. Divesting its more than 1,300-store retail locations is one of the last steps in that process. Among the names floated as possible buyers: BJ's Wholesale Club Inc., Marathon Petroleum Corp. and Alimentation Couche-Tard.
- After several years of reports that it was ailing financially and suggestions that it didn't understand the U.S. market, Britain's Tesco finally raised the white flag on its Fresh & Easy Neighborhood Markets on the West Coast. Yucaipa Cos., a U.S.-based private investment firm, acquired the 200-store chain in late November.
On Store Shelves
The rise of e-cigarettes topped product news in 2013. This was the year Reynolds American and Altria joined the e-cig race, officially recognizing that the new category could no longer be ignored. Some observers predict the category could top cigarette sales in just a few years, while others suggest it's a passing fad. Time will tell.
Of lesser effect to retailers, but widely reported in the consumer media, was the demise and rebirth of the Twinkie. When Hostess Brands Inc. filed for bankruptcy early in the year and eventually closed its doors, it led to a consumer run on the company's Twinkies, Ho-Hos and other snack cakes. The products were showing up on E-bay at phenomenal markups. A bulk of the brands was eventually purchased by Interstate Bakeries Corp. (IBC), returning the cakes to store shelves, often through uneven deliveries. Interstate later changed its name to Hostess Brands Inc.
Watch CSPnet.com later this week for our list of the most-read convenience store industry stories of 2013.