How Town and Country REALLY Makes Money

May 2, 2008
By Jennifer Litz
Special to LIVE!

"GAS WAR! Join the resistance!!!! I hear we are going to hit close to $4.00 a gallon by the summer. Want gasoline prices to come down? We need to take some intelligent, united action . . .

“Here's the idea: For the rest of this year, DON'T purchase ANY gasoline from the two biggest companies … If they are not selling any gas, they will be inclined to reduce their prices. If they reduce their prices, the other companies will have to follow suit."

So starts the National Association of Convenience Store’s list of “Gasoline Myths and Facts (see sidebar).” The NACS seeks to debunk the myth that boycotting certain gasoline brands will bring prices down.

“I think the perception of a lot of people is, gas prices go up, and ‘how much is that station making?,’ ” says Mary Sullivan, executive vice president and CFO of Susser Holdings Corp., which bought San Angelo-based Town & Country last November. “But we’re not the ones making the big bucks on it; we don’t make that much per gallon.”

Sullivan says it’s been the case for about 10 years that most of her company’s money is made inside the store, via food, beverages, and services offerings. “We used to make more on the fuel than we do currently,” Sullivan says. “That really changed for our company between 10 and 15 years ago, when stores like HEB and Wal-Mart started selling fuel. With more competition on the fuel side, we had to focus on how to do better inside the store.”

Sullivan’s telling the truth: Susser’s latest 10-K reveals that $144,566,000 worth of the company’s gross profit came from merchandise sold in the fiscal year that ended Dec. 30, 2007. Compare that with $91,785,000, the gross profit made from motor fuel for the same time period.

That $52,781,000 profit discrepancy spurs “c-store” executives to closely monitor the colorful, ever-changing inventory inside the store. Marketing managers constantly refer to scan data to see instantly what sells, what’s slow, and to make room for the newest candy, chips, or isotonic new age beverages.

Welcome to your c-store 2.0

They Should Rename them Drink Emporiums

Most c-store (insider lingo) marketing teams are well-oiled machines that review new products and tweak existing inventory—down to personalizing the food profile for a particular location. Their secret weapon is scan data, which gives them ongoing feedback.

“Our marketing team is able to use that [scan data] info to look at what’s selling,” Sullivan says. “Whether we need to teak our inventory; and what are the biggest-selling items, to make sure we always have those in stock.

“One of the things we do in South Texas with our beer vendors—we have a person that actually works for one of our beer distributors, and we share with them all of our detailed scan data. We have different beer sets; we may have 2-5 coolidors [more insider lingo] of beer. Every set of [stores] has a different selection of beer: Some parts of town have a bunch of imports, some have malt liquor—down to [whether a store carries] 18 packs vs. single serving cans.

“We’ve really just started tapping into the power of all the data we’re collecting. We’re using it and helping it guide our marketing decisions—for instance, looking at what sells with what, and what we can do to package up a hotdog with a bag of chips, or something with a candy bar.”

Susser VP of field marketing Kevin Mahany won’t reveal too many of his moneymaking secrets of strike-it-rich inventory. But he reveals some of the top-selling items across the board.

“Top items are Red Bull, and Dasani,” Mahany says. Right down to the bottled water, people have definite brand preferences.

“Coca-Cola delivers it. They’ve got more points of distribution than others, so people recognize it easier from place to place,” Mahany explains. “It’s no different in South Texas—that’s their No. 1 item. Monster Energy drink is a top item, too. Vitamin Water is up-and-coming, and Gatorade’s always strong.”

“I’m not going to get real specific, obviously, but our overall focus from the inside is on food and beverages,” Mahany says. “Beverages run the whole gambit from carbonated soft drinks to fountain beverages that are offered, to all the new age beverages that have been exploding nationwide. Whether it’s water, isotonics, or energy drinks. The energy drink business is probably one of the fastest-growing areas of the beverage business. So we’re emphasizing those more.”

Lunch On-The-Go

Mary Sullivan says their in-store hot food services sets Susser stores (comprised of Stripes [formerly Circle K] and Town & Country convenience stores) apart. South Texas stores boast the Laredo Taco Co., while Town & Country stores offer Country Cookin’ restaurants.

Susser introduced hot food services in 2001, Sullivan says. But it took a couple of years for them to get it right. Now the Laredo Taco Co. is popular with breakfast tacos, fajitas, and other regionally popular Tex-Mex food offerings. Country Cookin’ stores serve up hamburger and fried chicken fare.

“We originally tried to do them in a couple of central commissary locations and truck them out to the stores, do a delivery for breakfast and lunch,” Sullivan says. “And it wasn’t taking off. There was a little bit of hesitation that people had to go to a convenience store to have lunch. It wasn’t until we started cooking it in front of customers where they could see and smell that it was fresh food that it started taking off.”

The restaurants have been tweaked to regional tastes. “Texoma” stores in Texas and Oklahoma feature more turkey legs and sausage on a stick than South Texas Laredo Taco Companies, where customers prefer menudo and chicharrones.

“Even in Laredo, there’s a different type of tortilla they want than in McAllen,” Sullivan says. “And spices.”

“People know their regions. We have foodservice territory managers that cover our areas, and they work with the people in the store, and the people cooking, and [urge] them to [follow] their “cultural roots,” and how they make food for their family.”

Expect to see Country Cookin’ and Laredo Taco Co. in different areas now that Town & Country is part of the Susser brand.

Next up

And while you’re eating your taco or burger at the gas station, before you pick up your cold beer or bag of newly flavored, twisty shaped chips, don’t pass up the services section. Sullivan says lottery tickets and pre-paid phone cards for pay-as-you-go cell phones have been big growth categories.

In their South Texas stores, Susser stores even offer payday lending, check cashing, and their own brand of money orders.

In the future, marketing guru Kevin Mahany says, you might even be able to buy Internet time. “Pre-paid wireless is a big up-and-coming area,” he says, “and we’ve been building that. That’s part of a business that’s been growing in our company.”

Mahany notes that Susser is de-emphasizing the traditional hot-ticket item of cigarettes. It’s actually a declining category now.

But with all the other offerings—bank services, hot food, and wireless—who needs smokes?

Or gas, for that matter.