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SAN FRANCISCO -- While the second major snow storm in a week hit the eastern U.S., leading retailer and supplier executives in the convenience store channel met to discuss the industry's future Tuesday afternoon here at NACS' second annual Leadership Summit.
The two opening speakers gave very upbeat and hopeful presentations to kick off the conference on a high note.
Mike Szymanczyk, chairman and CEO of Altria Group, opened the first general session by noting "many of the perceived barriers to success in the tobacco category could be viewed as opportunities."
Szymanczyk acknowledged retailers worries about rising taxes on tobacco and new FDA regulation. But he noted that too many take a narrow view of the category and focus just on the large cigarette segment and don't appreciate the sales and profit gains being achieved in other tobacco products (particularly smokeless and machine-made large cigars). He pointed to Apple Computers as an example of a company that was mired in a challenging computer market until it redefined its market as the "digital lifestyle" and created a host of success products, from the iPod to the iPhone to the iPad.
"If all we see when we look at tobacco is new taxes and FDA, we'd be letting a lot of opportunities pass us by," said the CEO of the largest tobacco supplier. He noted while the cigarette category has been declining by 2-4 percent per year, the smokeless and cigars categories have grown by 12 percent per year in average sales per store over the past five years. Indeed, total tobacco poundage sold declined by only 1 percent in the past five years, said Szymanczyk.
On top of that, the growth in the OTP category has resulted in tobacco makers providing an increasing diversity of new products for adult tobacco users. "We need to expand our view to include existing tobacco user preferences in the OTP category," he added.
He also presented an interesting view of industry profits during these difficult economic times. Last year, he said, tobacco profits among manufacturers were up 2 percent and for retailers it was even higher. "Compare that to the banking and auto industries," said the CEO. "While other industries were getting bailouts, tobacco was contributing even more to tax revenues."
Szymanczyk was confident that the total tobacco category will grow and that convenience stores' portion of total tobacco sales will increase from its current 67 percent share.
Following Szymanczyk, Alain Bouchard, president and CEO of Alimentation Couche-Tard, North America's second largest convenience store chain, gave an equally passionate, yet self-effacing vision of the future. "My credentials as a visionary are not the greatest," began Bouchard. "We do everything in our power not to guess at the future."
He went on to explain: "when you analyze consumers regularly over a long time, you get a feel for what is coming … it all starts at the store and what the consumer does when he or she enters the store."
Couche-Tard has grown into a $16 billion, 6,000-plus convenience store retailer through three major strategies, according to Bouchard. The first is understanding the customer. The retailer views every market as local and invests in sophisticated measurement and analysis in each of its 11 geographic divisions, followed by constant exchange of best practices between divisions.
The second strategy is management discipline. The retailer has historically maintained a strong balance sheet and is very conservative about taking on debt. In addition, despite the many acquisitions made, Couche-Tard is known for its rigorous acquisition strategy, said Bouchard.
And finally, Bouchard cited the retailer's people. "We believe in utilizing our human resources. We are highly decentralized which leads to an extremely motivated and enthusiastic staff."
Bouchard added, "Our vision is one of unlocking the human potential in our people through training and empowering them. Where else can you be 25 years old and running a $10 million business?"
NACS chairman Jay Ricker, who is also president of Ricker Oil Co. based in Anderson, Ind., introduced the two speakers and noted this year's NACS Leadership Forum was focused on two categories that are extremely important to convenience stores: tobacco and foodservice.
NACS Leadership Forum continues Wednesday and Thursday in San Francisco.