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2014 Industry Outreach Version 4.1

2014 Industry Outreach Version 4.1. Hank Armour President & CEO. Presentation Overview . 2013 --- What a complicated year! Big Boxes shrinking Key operating numbers & trends How 2013 unfolded Regional comparisons Drill down on some key categories

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2014 Industry Outreach Version 4.1

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  1. 2014 Industry Outreach Version 4.1 Hank Armour President & CEO
  2. Presentation Overview 2013 --- What a complicated year! Big Boxes shrinking Key operating numbers & trends How 2013 unfolded Regional comparisons Drill down on some key categories Big trends impacting the industry globally What on earth is going on in Congress? Advocacy issues facing the industry
  3. 2013 – Death by 1000 Cuts!
  4. Not-So-Big-Boxes Coming to Town Source: Bloomberg BusinessWeek
  5. Powerful Industry Numbers 151,282 stores Far more than all other retail channels Dominant retail channel for big categories Gasoline (#1 – 82% share) Cigs (#1 – 85.6% share) OTP (#1 – 91.4% share) Beer (#1 – 58.4% share) Candy (#1 – 33.7% share) Lottery (#1 – 79.1% share) Pack Bev (#2 – 37.1% share) Salty Snacks (#2 – 20.2% share) 1.9 million employees 167 million transactions a day!!!
  6. Key Trends - Sales(Same Firms) Source: CSX, LLC.
  7. Key Trends - Gross Profit $(Same Firms) Source: CSX, LLC.
  8. Cigarette vs. Foodservice GP$YoY Change, 2009 – 2013 (ONLY firms w/5 consecutive years of data) Foodservice GP$s have grown FASTER than Cig GP$s in 3 of the last 4 years! Source: NACS Research
  9. NACS Regions Foodservice15.9%
  10. Regional Trends in EmploymentMonthly Growth Rate, 2011 – 13 (January 2011 = 100) 6 West 2 Southeast 3 Midwest USA 5 Plains 4 South Central 1 Northeast Source: Bureau of Labor Statistics
  11. Key Trends – Regional Sales(Same Firms) Source: CSX, LLC.
  12. Key Trends – Regional Sales GrowthSame Firms-Change YOY Source: CSX, LLC.
  13. Key Trends – Regional Gross Profit $(Same Firms) Source: CSX, LLC.
  14. Key Trends – Regional Gross Profit Growth(Same Firms-Change YOY) Source: CSX, LLC.
  15. Gas Consumption Continues to Decline Jan 2007 9,292 bbl/day Mar 2014 8,602 bbl/day TTL = (7.4)% Source: Energy Information Agency
  16. Regional Fuel Consumption (% of US total)(Most Recent 12 months of sales) % Chg, ‘10 vs. ‘13 Source: EIA Prime Supplier Sales Volumes
  17. Regional Trends in Fuel ConsumptionTrailing 36 Mos. through August 2013, Sept. 2010 = 100 5 Central 6 West 3 Midwest 4 South Central USA 2 Southeast 1 Northeast Source: EIA, Prime Supplier Sales Volumes
  18. In-Store Contribution +2.5% YoY Total Dollar Sales: $136,265 per store per month +4.5% YoY Total GP Dollars: $44,514 per store per month Tobacco 18.7% 14.8% for stores selling beer 9.1% for stores selling beer Source: State of the Industry Survey and CSX LLC
  19. In-Store Sales ContributionBy NACS Region Foodservice15.9%
  20. In-Store GP$ Contribution By NACS Region Foodservice15.9%
  21. Foodservice Sales Contribution Foodservice Sales Contribution = 18%, Margin Contribution = 29% Cold & Frozen3.4% Beer Prep Food & Commissary10.8% Source: State of the Industry Survey and CSX LLC
  22. Foodservice2013 Source: State of the Industry Survey and CSX LLC
  23. Foodservice Sales and Margin Change2013 Change YOY Source: State of the Industry Survey and CSX LLC
  24. Foodservice Sales GrowthTrailing 36 Mos., December 2010 = 100 121 CDB 106 FDB 100 HDB Source: CSX, LLC
  25. Foodservice Margin GrowthTrailing 36 Mos., December 2010 = 100 152 Prepared Food 129 CDB 123 Commissary 104 HDB 94 FDB Source: CSX, LLC
  26. Foodservice Sales2013 Sales Change YOY By NACS Region Source: State of the Industry Survey and CSX LLC
  27. Foodservice GP$2013 GP$ Change YOY By NACS Region Source: State of the Industry Survey and CSX LLC
  28. Top Ten 2013 Merchandise Categories Source: State of the Industry Survey and CSX LLC
  29. Top Ten Merchandise Categories2013 YoY Changes Source: CSX, LLC.
  30. Top Ten Merchandise Categories2013 Sales Change YOY By NACS Region Source: State of the Industry Survey and CSX LLC
  31. Top Ten Merchandise Categories2013 GP$ Change YOY By NACS Region Source: State of the Industry Survey and CSX LLC
  32. Syndicated Cigarette Landscape Betting on tobacco to generate traffic and sales $2.0B in Tobacco Sales up for Grabs Dollars: -1.4% 10,956 units Cigarette /Tobacco Outlets up 5.6% YOY Possible ban at military exchanges as soon as Oct 1 Source: Nielsen
  33. Syndicated OTP Landscape Moist Smokeless and Spitlesstobacco drive OTP growth E-cigs estimated at $700M, internet sales difficult to track Dollars: +8.0% Shift to vapors/tanks Units: +4.7% Looming legislation Source: Nielsen
  34. Syndicated OTP Sales Sales Change Unit Change Source: Nielsen
  35. Tobacco Sales GrowthTrailing 36 Mos., October 2010 = 100 Total Merchandise Sales Cigarettes Source: CSX, LLC.
  36. Tobacco Margin GrowthTrailing 36 Mos., October 2010 = 100 Total Merchandise Margins Cigarettes Source: CSX, LLC.
  37. Syndicated Pack Bev Landscape Protein craze and the rise of the aware shopper Units: +2.9% Energy and hybrid drinks – caffeine rules The Holy Grail of Pack Bev - natural sweeteners Source: Nielsen
  38. Pack Bev Sales GrowthTrailing 36 Mos., October 2010 = 100 Pack Bev Total Merchandise Source: CSX, LLC.
  39. Pack Bev Margin GrowthTrailing 36 Mos., October 2010 = 100 Pack Bev Total Merchandise Source: CSX, LLC.
  40. Syndicated Beer Landscape New Beer Entrants Walgreens: +4%CVS: +5% Dollars: +2.0% Units: +2.2% Double alcohol sales by 2016Steep discounting Source: Nielsen
  41. Beer Sales GrowthTrailing 36 Mos., October 2010 = 100 Beer Total Merchandise Source: CSX, LLC.
  42. Beer Margin GrowthTrailing 36 Mos., October 2010 = 100 Beer Total Merchandise Source: CSX, LLC.
  43. Snacks = Center Store Center Sales Contribution = 9.9%, Margin Contribution = 12.4% Alt Snacks1.1% Tobacco Candy3.1% Pack Bev Source: NACS State of the Industry Survey , CSX LLC
  44. Center Store Sales GrowthTrailing 36 Mos., October 2010 = 100 Total Merchandise Source: CSX, LLC.
  45. Center Store Margin GrowthTrailing 36 Mos., October 2010 = 100 Total Merchandise Source: CSX, LLC.
  46. Core Direct Store Operating Expense Source: CSX, LLC.
  47. Profit vs. Card Fees Source: NACS Research
  48. Store Operational Productivity Source: NACS State of the Industry survey & CSX, LLC
  49. Capital Productivity Source: NACS State of the Industry survey & CSX, LLC
  50. People Productivity Source: NACS State of the Industry survey & CSX, LLC
  51. Whew – That Was A Lot! So What? Demand destruction in Fuel & Cigs And it’s not going to get any better Refreshment is the Destination! Pack Bev, Beer, Dispensed Bev Food is Key…and not just Foodservice Foodservice Candy, Salty Snacks, Fruit Healthy options Non-traditional categories are growing Lottery, Car Washes, Financial Services Source: CSX, LLC.
  52. Global Trends Hitting the U.S. Shores Government intervention in your business Cross channel competition Expands your competitive set Expands your customers expectations Nutrition/Obesity concerns Regulatory pressure & consumer “demands” Payment systems EMV (chip & pin, or no pin?) Mobile BitCoin
  53. What’s Going on in Congress? Top 2014 NACS Advocacy Issues SNAP (food stamps) Menu labeling Swipe fees (litigation, legislation, mobile) Data security (EMV, credit+pin) Healthcare reform Fuel issues (E15 liability, RFS, highway funding) Online lottery And more! (Energy Drinks, GMO, LCFS)
  54. Swipe Fees Update Litigation against the Federal Reserve Lowering the debit fee cap Open routing provisions ignored Already a $400 million annual savings Anti-trust litigation Appealing the ridiculous settlement Legislative plans Mobile payment systems We’re definitely not done with this war!
  55. Government Intervention Invest in Your Business Make a financial commitment The government can cost you more in a day than you make in a year The NACS Interchange Action Fund Corporate dollars NACSPACfor political influence Personal dollars Engage with your elected representatives NACS Day on the Hill in DC > every year in Feb/Mar Meet with elected officials and send emails Use our Grassroots Action tools
  56. Select 2014 NACS Events NACS Leadership Forum Miami: February 10-12 NACS Government Relations Conference & Day on the Hill Washington, DC: February 24-26 NACS HR Forum Tampa: March 4-6 NACS State of the Industry Summit Chicago: April 1-3 NACS Leadership Challenge Program for Store Supervisors Millwood, VA: April 6-11 NACS Financial Leadership Program @ Wharton, University of Pennsylvania Philadelphia: May 18-23 NACS Executive Leadership Program @ Cornell University Ithaca, NY: August 3-7 NACS Show Las Vegas: October 7-10
  57. NACS Contact Information Hank Armour President & Chief Executive Officer +1.703.518.4282 harmour@nacsonline.com www.nacsonline.com
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