Casey’s Not Concerned About Grocers’ Gas

Discussion
May 09, 2006
George Anderson

By George Anderson

The box its stores operate in is substantially smaller but Casey’s General Stores has taken a path similar to Wal-Mart in its rise in the convenience store ranks.

The chain of convenience stores has succeeded largely by opening stores in underserved rural markets and by offering products that locals within those markets need even if the items are different from those found in most other convenience stores.

For many in the convenience store space, the move by big box competitors from Costco (clubs) to Hy-Vee (supermarkets) to Wal-Mart (supercenters/discount stores) into gasoline sales have begun to erode one of the primary means small boxes have depended on to drive store traffic.

Casey’s, at least publicly, is not sweating the situation.

Bill Walljasper, chief financial officer for Casey’s, told the Des Moines Register, “We have no real concerns about the new competition.”

According to research from the Food Marketing Institute (FMI), more than 25 percent of grocery stores now offer gasoline at their locations.

There are numerous reasons behind this trend, according to Michael Sansolo, senior vice president of FMI. “Shifting consumer behaviors and attitudes, shorter product life cycles, new store concepts and competitive pressures from a broad range of retail formats are driving a fundamental change in the way food retail companies do business,” he said in a released statement.

Among those operating in markets with a fairly close proximity to Casey’s stores is the Iowa headquartered employee owned chain, Hy-Vee. The chain currently has 67 of its 198
stores in the Midwest pumping gas.

Moderator’s Comment: Does Casey’s General Markets have less to be concerned about in respect to big box gasoline competition than others in the convenience
store business? Will there come a point where so many stores pump gas that it becomes less of a point of differentiation than it is now? What is the primary reason besides price
that consumers buy gas from a retailer?
– George Anderson – Moderator

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9 Comments on "Casey’s Not Concerned About Grocers’ Gas"


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Mark Burr
Guest
14 years 9 months ago
It’s not simply about location, location, location as one might think. Location is a factor, However, it’s in regards to a destination, not necessarily convenience. Unless, the top reason (while it is a factor) that consumers are choosing their supermarket or big box store is on the basis of a convenient location. One can question whether that isn’t necessarily true. Consumers today travel past choices to a “destination” rather than simply to their neighborhood supermarket. If that “destination’ includes gas in their offering, it has then expanded the opportunity to capture more of the consumer’s wallet. That’s one reason; the other is the ability of those retailers to market their gas along with their entire offering. To understand this, simply take Costco (price), Kroger, Giant Eagle and others into consideration. Major supermarkets have the ability to market savings on gas with their entire offering to make the ‘destination” more of a “value” to the consumer. In this case it’s all about a more expanded and complete destination worthy of the consumer passing the other opportunity… Read more »
James Tenser
Guest
14 years 9 months ago

Casey’s annual report underscores the crucial role of fuel sales at its 1,300-plus locations. Managing that business is a core expertise for the firm, unlike some of its newer supermarket competitors. Nevertheless, the entry of supermarkets and Wal-Mart into Casey’s comfort zone must be viewed as a competitive threat. For Casey’s, fuel is a key profit center; for some supermarkets, it’s a traffic generator. In an era of volatile but high gasoline prices, Casey’s will have to bear down some.

Jim Wisuri
Guest
Jim Wisuri
14 years 9 months ago

If you look at Casey’s web site, you will find that pizza is their differentiator. Every store location includes a pizza phone number.

Casey’s also offers a pizza fund-raising program that helps small-town organizations make a few bucks in partnership with their local Casey’s.

Yes, Casey’s has gasoline and all the other convenience store trappings. But whether you’re at a Casey’s in Pella, Iowa or Polo, Ill., there’s a fair chance that pizza has some influence on how often you stop to fuel up.

And, as Art Williams pointed out, location is a huge part of the Casey’s success story. There ain’t no Costco in many of the communities that Casey’s serves. There may not even be another service station.

Bob Bridwell
Guest
Bob Bridwell
14 years 9 months ago

I’ve never seen the CFO, but I bet he has freckles, red hair and gap in his front teeth. He has to be Alfred E Neuman, of the “What, Me Worry?” fame.

Is he the same guy who pooh-poohed the discount stores from Podunk selling groceries 20 years ago?

I used to buy gas at Casey’s, until my grocery store started selling gas. My grocery store gives me a discount and I can do everything all at once now.

If you sell gas, you better be concerned everyone that is selling it. Most people consume relatively the same amount gas from week to week. Pretty easy to do the math, a loss of 6 tankfulls (16 gal) per store times $3/gal times 52 weeks is about $15K per store in lost sales.

I rest my case. I’d be concerned how precarious my position really was/is.

Dean Cruse
Guest
Dean Cruse
14 years 9 months ago

With fuel making up over 60% of the average convenience store revenue, low-cost competitors are an absolute threat. Especially when the retail margins on gas – even with today’s high prices – are pennies per gallon. The average convenience store can actually make more on a 12-oz cup of coffee than a 12-gallon tank of gas. So, they must leverage their location, but entice consumers into the store to buy higher margin products – if they want to survive the onslaught of lower cost alternatives and build a thriving business.

Camille P. Schuster, PhD.
Guest
14 years 9 months ago

Not all Costco stores sell gasoline. There are two Costco stores near me and only one sells gasoline. Both are always packed with customers. Costco’s attraction is not just gasoline – it is also what is in the store.

Kai Clarke
Guest
14 years 9 months ago

Casey’s should be concerned about the advantages of offering discount gas to their customers. This is rapidly becoming a key shopping feature as consumers try to conserve trips to the store and manage ever rising fuel prices. As prices rise, consumers will become more fuel conscious and the advantages of offering discount gas will become more of an attraction. Casey’s needs to heed this and move forward with offering fuel at their stores. This will keep them competitive and not give their customers a reason to shop somewhere else.

Mark Lilien
Guest
14 years 9 months ago

Casey’s could copy First Fuel Banks and be truly innovative by letting its customers save money as gas prices rise. Otherwise, if a Sam’s Club or Costco locates conveniently nearby with substantially lower fuel prices, Casey’s will be hit hard. It’s unlikely that any unique convenience store assortment will entice shoppers to drive significantly out of their way.

Art Williams
Guest
Art Williams
14 years 9 months ago

I believe the old saying “Location, location, location” is the primary motivation other than price. With gas prices so high and so much in the news, price is probably even more important in the short term. Also I think people get in the habit of shopping at a favorite station and it takes some special stimulus to get them to change. We get used to a favorite clerk or brand of coffee and that increases our comfort zone with that establishment. Or the station is most conveniently located on the primary leg of our daily commute and is the easiest to get in and out of.

With Casey’s, they are located in so many small towns where they are a social meeting place in addition to a place for gas and necessities. They have done a very good job with their site selections.

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