By Joe Petrowski

It does not take a Congressional investigation to figure out why private equity and Warren Buffet are enamored with the retail convenience and the fuel industry:

  1. Business greatly benefited by size and scale
  2. Excellent returns on incremental improvement capital
  3. Many firms desiring a liquidity event
  4. Performance enhanced by corporate infrastructure

A 5th reason can now be added:

  1. Convenience is the fastest growing brick and mortar and only secure channel in retail

The numbers are as follows:

US retail sales will exceed $5.4 trillion this year as measured by the Commerce Department (about 40% of the GDP), with most of the sales coming from six sectors: convenience, grocery, hardware/home improvement, on-line, pharmacy and department store. This $5.4 trillion in spending comes from 144 billion transactions (an average of $37/retail transaction). Here here is a breakdown of the various sectors:

To look more in depth at the retail convenience, it:

  • Enjoyed 20% of the US total of retail transactions
  • Has the greatest core of loyal and habitual customers (lottery, tobacco, coffee, fuel)
  • Not threatened by on-line purchases
  • Better sales/square foot than other formats ($300/sq. ft.)
  • Convenience growing faster than other channels (2% above core GDP)

With a 6% annual growth in online shopping and the foot traffic at traditional malls falling 5%/year, it’s likely that at least 25% of the 1,500 malls in the US shut down in the next five years. Investors are seeking a safe harbor and convenience retail and fueling represents that safe harbor.

 

Joe Petrowski has had a long career in international commodity trading, energy and retail management and public policy development. He currently serves as the fuel director of Yesway convenience stores and an adviser to their Chairman on Operations and Merchandising, as well as a director of Xebec, a Canadian manufacturer of Clean technology and Green Print, a carbon mitigation firm. Petrowski previously served as the president and CEO of Gulf Oil LP and was elected to the Gulf Oil LP Board of Directors and then as CEO of the now combined Gulf Oil and Cumberland Farms. He is Managing Director of Mercantor Partners, a private equity firm investing in convenience and energy distribution.