GLGi: Convenience Retailing

GLGi: Convenience Retailing & Petroleum Marketing Industry

Wednesday, July 11, 2007

New York

© 2007 Gerson Lehrman Group Inc., All Rights Reserved

Council Member Biography

Steve Montgomery is currently the President of b2b Solutions, LLC, a premier c-store consulting team that has the capability and resources to provide total solutions to help retailers and suppliers understand and accomplish their goals in the c-store / petroleum channel. Mr. Montgomery has over 25 years of experience that spans top management positions in both entrepreneurial and large corporate business environments. He has served as President and Member of the Board of Directors for Dairy Mart Corporation, and as General Manager for Convenience Stores and Manager of Convenience Retail Strategies and Programs for Amoco Oil Company. Steve is a past member of the Board of Retailer Directors of the National Association of Convenience Stores (NACS) and is currently a Member of its Supplier Board. Steve is a frequent contributor to articles on the convenience / retail petroleum industry and is a frequent speaker at industry functions. He has worked with NACS as a Program Director and Program Moderator on topics ranging from Foodservice to Non-Traditional Competitors.


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Gerson Lehrman Group Contacts

Randi CulangConsumer Goods & Services Global Research HeadGerson Lehrman Group850 Third Avenue, 9th FloorNew York, NY [email protected]

Christine RuaneSenior Product ManagerGerson Lehrman Group850 Third Avenue, 9th FloorNew York, NY 10022212-984-8505 [email protected]


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Convenience Retailing &

Petroleum Marketing Industry

AgendaAgenda

Overview Of The C-store / Petroleum Industry

Current Structure Changes

Industry Challenges

Major Players– Major Oil Companies (MOC’s)– The Publicly Traded Companies

Industry OverviewIndustry Overview

Change in Retail SalesChange in Retail Sales

Source: US Department of Commerce

2004 2005 2006

Total Retail Sales 6.5% 7.0% 5.0%

Warehouse Clubs/Superstores

12.1% 11.4% 10.3%

Convenience In-Store 13.7% 14.4% 8.3%

Restaurants 6.5% 6.0% 8.0%

Drug Stores 1.6% 4.9% 7.9%

Grocery Stores 5.7% 4.2% 4.1%

Discount Department Stores

0.9% (1.1)% 0.5%

Average Industry Store MetricsPer Month


Sales 2005 2006 Change

Merchandise $79,458 $84,450 6.3%

Foodservice $10,688 $10,942 2.4%

In-Store $90,146 $95,392 5.8%

Motor Fuel $213,333 $254,658 19.4%

Source: 2007 NACS State of the Industry Survey powered by CSX



2005 2006 Change

In-Store Gross Margin $ $26,623 $26,708 0.3%

Motor Fuels Gross Margin $ * $17,675 $13,617 (23.0)%

Operating Income $9,209 $8,250 (10.4)%

Pretax Profit $3,516 $2,783 (20.9)%

* Fuel Stores Only

Source: 2007 NACS State of the Industry Survey powered by CSX

C-Store Industry OverviewC-Store Industry Overview

Number Of Stores – 145,119

Number Selling Fuel – 114,974

Avg. Gross Margin Per Gallon – 14.7¢

Avg. Merchandise Sales – $1,144,704

Avg. In-store Gross Margin – 28.0%

NACS SOI 2007

Changing Business ModelChanging Business Model

Who Sells Fuel?Who Sells Fuel?

Gasoline Is A Zero Sum Game 78% Of All Gasoline And Diesel Sold By C-

stores (2005 NACS Estimate)

2.4%< Of Fuel Locations Owned And Operated By MOC’s (C-Store News, August 2006)

– BP North America: 1,131 stores – ExxonMobil Corp.: 896 stores – ChevronTexaco Corp: 373 stores – Shell Oil Products US: 168 stores – ConocoPhillips Inc.: 150 stores

Revenue / Profit StreamsPer Location / Per Year

Revenue / Profit StreamsPer Location / Per Year

NACS 2007 SOI

Average Sales

% of Total

Average $GP

% of Total

Gasoline $3,055,896 73% $163,404 34%

Store Sales $1,144,704 27% $320,496 66%

Total $4,200,600 100% $483,900 100%

Consumer InsightsConsumer Insights

By The NumbersBy The Numbers

Percent Who Shop C-store At Least Once A Month– Male 78%– Female 75%

Frequent Shoppers (once a week or more)

– Male 65%– Female 55% (main difference in daily frequency – 14%

vs. 8%)

Reason For C-Store TripReason For C-Store Trip

010203040506070

b2b Solutions, LLC

Reason For Store ChoiceReason For Store Choice

39.20%

28.50%

25.40%

24.90%

20.20%

18.20%

17.40%

11.20%

9.90%

8.80%

8.40%

6.40%

GASOLINE AVAILABLE

HOURS OF OPERATION

PRICE OF GAS

FRIENDLY EMPLOYEES

CLEAN BRIGHT STORE

PRICE OF PRODUCTS

SELECTION OF PRODUCTS

NAME OF CHAIN

VARIETY OF SERVICES

OVERALL STORE APPEARANCE

RESTROOMS

FRESH PREPARED FOOD NPD Research

Current Structural ChangesCurrent Structural Changes

Industry StructureIndustry Structure

Independent Refiner

Distributor / Jobber

Distributor Owned / Dealer Operated

On Fuel Commission

Major Oil Company

Distributor Owned / Operated

Distributor Supplied

Company Owned / Dealer OperatedOn Lease Basis

Company Owned /Company Operated

Dealer Owned / Dealer Operated

Distributor Owned / Dealer OperatedOn Lease Basis

b2b Solutions, LLC

Current Structure ChangesCurrent Structure Changes

Major Oil Companies Shedding Stores– Big companies – not good at operating

small boxes– Hard to get senior management attention

» SOTG / never make the rounding» ROI less than alternatives

– Network rationalization» primarily going to jobber / franchise operations» recoup capital / retain fuel volume

MOC’s Disposition FormatsMOC’s Disposition Formats

Shell – Multi-Site Operator (MSO)– Couche-Tard (236 sites)

BP (Auction Process)– ARCO am/pm franchise– BP am/pm franchise

ExxonMobil (On The Run - Franchise) Chevron (Extra Mile - Franchise)

Industry’s Economic ChallengesIndustry’s Economic Challenges

Industry’s Economic ChallengesIndustry’s Economic Challenges Increased Capital Cost Changing Business Model A Challenge For

Smaller Format Stores (Island Marketers) Increasing Complexity Dependence On Limited Number Of Product

Categories Increasing Operating Cost

– Employee turnover– Labor cost (min. wage increasing)

Increasing Capital RequirementsIncreasing Capital Requirements Convenience Based Business

– Easy access to traffic critical– Competition for corners driving up land cost

(especially drugstores)

Increased Size– Stores

» more complex offering» changing expectations

– Land requirements increasing» changing product mix requires more parking spaces» additional profit centers

Increased Capital RequirementsIncreased Capital Requirements

NACS SOI 2002 / 2006

2002 2006

Urban Rural Urban Rural

Land $671,300 $381,200 $836,714 $432,790

Bldg. $513,000 $537,000 $771,199 $557,948

Equipment $562,700 $550,700 $1,132,875 $820,501

Inventory $84,800 $72,600 $113,361 $103,521

Total $1,831,800 $1,541,500 $2,854,149 $1,915,060

Reliance On Selected CategoriesReliance On Selected Categories

Gasoline

Cigarettes

Top Ten Categories

Reliance On - GasolineReliance On - Gasoline

Fuel Is Traffic Driver C-store Sell 78% Of All Gasoline (NACS

Estimate – 2005) C-stores – ⅓ Margin Comes From Fuel Fuel Is Becoming More Of A Commodity

– Government regulation (allows less variation)

– Spaghetti factor– More c-store retailers going “unbranded”

Reliance On GasolineReliance On Gasoline Fuel Profitability Measured On CPG Reported On Gross Basis Reported Based On WAM NACS Reported Fuel Margins

– 2002 – 12.7 CPG– 2003 – 13.7 CPG– 2004 – 12.7 CPG– 2005 – 16.3 CPG– 2006 – 14.7 CPG

Margins Vary By Region / MarketNACS Fact Book 2006

NACS 2007 SOI

Reliance On – GasolineMargin Variation


OPIS Presentation NASC 2007 SOI


Impact Of Credit Card Fees– Credit card usage increases as gasoline

prices increase– Consumers urged to use higher fee cards– NACS reports credit card fees have risen

from $3.2B in 2003 to $6.6B in 2006– Credit card fee structure

» Flat rate per transaction» Plus %


Credit Card Alternatives “Discount For Cash”

– Typical 5¢ per gallon– Credit Cards Fighting (CA Lawsuit)

Debit Cards (lower fees) ACH (Automatic Clearing House)

– Flat fees (some as low as 15¢ per transaction)– Linked to

» loyalty cards» drivers’ licenses

Reliance On - GasolineReliance On - Gasoline New Competitors

– Big box (Wal-Mart)– Supermarkets – Membership organizations (Sam’s, Costco, BJ’s)

Changes In Their Business Model– Impact on selling enough fuel to impact overall

sales / margin numbers– Wal-Mart selling its real estate to Murphy– Wall Street demand that they make money– Impact on certain areas of the country greater

than others (Texas vs. North East)

Reliance On - CigarettesReliance On - Cigarettes Model Changing

– Had a sizable profitability component based on purchases / displays

– Now based more on actual sales NACS SOI Data (Short Term Changes Not Dramatic)

– 2007» 34.35% of in-store sales» 21.1% of in-store gross margin

– 2002» 38.7% of in-store sales» 25.9% of in-store gross margin

Reliance On - CigarettesReliance On - Cigarettes % Gross Margin Declining

– 2002 (20.8%)– 2007 (18.0%)– Margin declining, but on higher unit value

$ Gross Margin Increasing (Avg. Per Store)– 2002 ($63,657) – 2006 ($69,742)

Business Moving From Cartons To Packs– 2002 (62.8% cartons)– 2005 (41.0% cartons)

NACS Fact Book 2003 / NACS 2007 SOI / NACS SOI Index Group

Reliance On - CigarettesReliance On - Cigarettes

Data Source: AIM

Convenience / Gas Retailers Five Year Carton Shipments

Cigarette Category Continues To Grow In The Convenience Store Channel

Still Approx. 18.5 Million Consumers Buying Cigarettes In Other Than Convenience/Gas

Premium Brands Continue To Grow In Market Share

Premium Brand Market Share In Convenience / Gas Is 77.6% (Higher Than Any Other Class Of Trade)

Reliance On - Cigarettes

Data Source: McLane Company

2007 Top Ten Categories(as a % of GM$ Contribution)

2007 Top Ten Categories(as a % of GM$ Contribution)

Category % Of In-store GM$Cigarettes 21.1Packaged Beverages 17.0Beer 8.6Foodservice Prepared Onsite 7.9Hot Dispensed Beverages 7.3Candy 5.7 Cold Dispensed Beverages 3.7Other Tobacco 3.7Salty Snacks 3.7General Merchandise 2.6

All Others18.7%

Top 1081.3%

NACS 2007 SOI

Increased Operating Cost - LaborIncreased Operating Cost - Labor

Measured In Terms Of Hours Per Store Per Week Dollars (Per Store Per Week/Month) % Of Sales (Total / Inside) % Of Total Gross Margin Sales Per Man Hour Sales Per Labor Dollar (Foodservice)

Increased Operating Cost - LaborIncreased Operating Cost - Labor

Growing In Terms Of Dollars Stable / Declining As Percentage Of Total

Gross Profit– 2001 (38.6%)– 2005 (35.9%)– Influenced by growth In $GM from foodservice

Impact of Proposed Increase In Min. Wage

NACS 2002/2006 SOI

Increased Operating Cost - LaborIncreased Operating Cost - LaborTurnover – The Hidden Cost

Average Store Has 11.1 Employees– 6.1 Full time– 4.0 Part time

Turnover Rates (NACS 2007 SOI Same Store Sample)

– Store managers (19.7%)– Full time (83.9%)– Part time (79.8)

Turnover Cost– Depends on metrics used (hard / soft)– Potentially greater with larger foodservice offer

NACS 2006 / 2007 SOI

The PlayersThe Players

The PlayersThe Players

The MOC’s

Casey's

The Pantry

Alimentation Couche-Tard, Inc.

Susser Holdings Corporation

Delek US Holdings, Inc.

The Players – The Oil CompaniesThe Players – The Oil CompaniesFuel – Not Store Driven

ExxonMobil BP Chevron Shell Amerada Hess ConocoPhillips, Inc Sunoco CITGO Tesoro

The Players – Casey’sThe Players – Casey’s Headquartered In Ankeny, Iowa Operates Primarily In Rural Markets Operates 1,463 Stores In Nine Midwestern

States Low Cost / Low Sales Utilizes Self-distribution For In-store Mdse.

(90% Of Items Sold) Hauls Most Of Its Own Fuel (~75%) Known For Proprietary Pizza / Doughnuts

The Players – Casey’sThe Players – Casey’s Historically Used Organic Growth

– Purchased 49 Gas N’ Stops January, 2006– 2006 Annual Report future acquisitions likely

Fuel– Generated 70.8% of net sales– 2006 Margin (11.5 cpg) / 2007 goal (10.8 cpg)– Contributed 24.3% of total gross margin

In-Store– Generated 29.2% of net sales– 2006 Margin (31.5%) / 2007 goal (32.2%)– Contributed 75.7% of total gross margin

The Players – The PantryThe Players – The Pantry Headquartered In Sanford, North Carolina Operates In Eleven States In Southeast Operates 1,500 Stores 80% Of Stores Branded Kangaroo Express Operates 197 QSR’s

– Subway– Quiznos

Operates 179 Car Washes Average Store Size 2,600 Sq. Ft.

The Players – The PantryThe Players – The Pantry Fuel Brands (BP/Amoco / CITGO (82%) and Kangaroo –

1,100 locations)

Fuel– Generated 77% of net sales – Gross margin 15.8 cpg– Contributed 35% of total gross margin

In-Store– Generated 23% of net sales– Gross margin 37.4%– Contributed 65% of total gross margin

The Players – Alimentation Couche-Tard


Headquarted In Laval, Quebec Canada Operates In Canada (Mac’s) / U.S. (Circle K) Entered U.S. Via Acquisition In 2001 Operates 3,000+ Locations In 28 States Operates Decentralized Structure of Six

Region In U.S. (Max. Preferred 600 Stores) Regional V.P. Of Operations Function As

Business Unit CEO’s 77% Of Revenue Comes From U.S.



Fuel (U.S.)– Generated 64.2% of net sales– Gross margin 15.4 cpg – Contributed 25.1% of total gross margin

In-Store (U.S.)– Generated 35.8% of net sales – Gross margin 33.2%– Contributed 74.9% of total gross margin

IMPACT Store Upgrade Program (Innovation-Marketing-People-Alimentation-Couche-Tard)

– Designed to target local preferences– Cost of $90-$180MM– ~50% Currently completed

The Players – Susser Holding Corp.The Players – Susser Holding Corp. Headquartered In Corpus Christi, Texas Long Family History In Industry Went Public In October, 2006 Operates In Texas And Oklahoma 320 Stores Re-imaged To Proprietary Stripes Brand

In 1st Qtr. 2007 From Circle K 135 Laredo Taco Company Locations Supplies Fuel To 367 Dealers

The Players – Susser Holding Corp.The Players – Susser Holding Corp. Fuel

– Generated 71.3% of net sales– Average annual gallons 1,243,000– Gross margin 13.6 cpg– Contributed 37% of total gross margin

In-Store– Generated 28.7% of net sales– Average mdse. Sales per store $887,000– Gross margin 32.6%– Contributed 63% of total gross margin

The Players – Delek USThe Players – Delek US Based In Nashville Owned By Delek Group Limited (Israel) Entered US Market In May, 2001 With

Acquisition Of Mapco Express Went Public May, 2006 Operates Texas Refinery Sells Fuel Under Its Own Plus Four Other

Brands– BP– Exxon– Chevron– Shell

The Players – Delek USThe Players – Delek US Fuel

– Generated 76.3% of net sales– Average annual gallons 1,075,000– Gross margin 14.5 cpg– Contributed 37% of total gross margin

In-Store– Generated 23.7% of net sales– Gross margin 30.6%– Contributed 63% of total gross margin

69% of In-Store Merchandise Comes From McLane Company

The Players – Alon USAThe Players – Alon USA Based In Dallas, TX Owned By ALON Israel Oil Co. LTD Entered US Market In August, 2000 With

Acquisition FINA Inc.'s Downstream Operations Went Public July, 2005 Operates

– Four Refineries (Texas, California and Oregon)– 1,200+ FINA brand retail sites– 206 Southwest Convenience Store (FINA and 7-

Eleven)» West Texas» New Mexico

The Players – Alon USAThe Players – Alon USA Fuel

– Generated 55.3% of net sales– Average annual gallons 408,000– Gross margin 16.0 cpg– Contributed 19.1% of total gross margin

In-Store– Generated 44.7% of net sales– Gross margin 32.9%– Contributed 80.9% of total gross margin

55-60% Of In-Store Merchandise Comes From McLane Company

Q&AQ&A

AppendixAppendix

Purchase Value Purchase Value

Value Primarily Based On EBITDA EBITDA Based

– Current store level– Adjustments

EBIDTA Ranges– 4X to 6X fee properties– 1X to 3X non-fee properties

Purchase Value Purchase Value

Sales Lease Back Popular Financing Mechanism

Based On Coverage Ratio (EBITDA After Corporate

G&A Allocations To Rent Ratios) Ranging From 1.75X To 2.0x

Cap Rates Range From 8.5% to 9%

Annual Change in Retail SalesAnnual Change in Retail Sales

Source: US Department of Commerce

2004 2005 2006

Total Retail Sales 6.5% 7.0% 5.0%

Convenience Stores

In-Store Sales 13.7% 14.4% 8.3%

Motor Fuel Sales 18.9% 31.1% 17.9%

Total Sales 17.1% 25.5% 14.9%

2007 Survey Sample2007 Survey Sample

CategoryNielsen Count of

Convenience Stores

SOI Sample

(including CSX)SOI Sample % of

Nielsen Count

A(1-10 stores)

96,639 301 0.3%

B(11-50 stores)

12,529 2,008 16.0%

C(51-200 stores)

10,403 2,885 27.7%

D(201-500 stores)

6,296 2,542 40.4%

E(500+ stores)

19,252 14,282 74.2%

Total 145,119 22,018 15.2%

Source: Nielsen, 2007 NACS State of the Industry Survey powered by CSX

Data Source: IRI/MARLIN

Share Of Total U.S. Cigarette Industry Volume by Major Class of Trade

Share Of Total U.S. Cigarette Industry Volume by Major Class of Trade

Driving Behavior Impacts C-StoresDriving Behavior Impacts C-Stores

■ Consumers Who Said They Are Shopping C-stores Less Are Also Driving Less Than Last Year

■ 41% Of C-store Shoppers Say They Are Driving Less

Source: The NPD Group / Study: Winning Back the C-Store Shopper

Driving Behavior Impacts C-StoresDriving Behavior Impacts C-Stores

Average Hours A Day In Car

3.9

4.5

5.0

4.8

4.3

3.2

Light (1-5)

Medium (6-10)

Heavy (11-19)

Very Heavy (20+)

C-Store Shoppers

NON-C-Store Shoppers

Source: The NPD Group / Study: Winning Back the C-Store Shopper

C-Store Shopping At The Time Of Gas Purchase Continues To Fall

C-Store Shopping At The Time Of Gas Purchase Continues To Fall

72

23

73

22

74

22

75

20

76

19

NO OTHER SERVICE CONVENIENCE STORE

2002 2003 2004 2005 2006

Source: The NPD Group / Motor Fuels Index

Other Services Used at Time of Gas Purchase

C-Store Channel PenetrationC-Store Channel Penetration

63.1% 63.6% 61.8% 60.5%

2003 2004 2005 2006

Source: The NPD Group / Convenience Store Monitor

Penetration = Percentage Of Individuals Who Made A C-store Purchase In An Average 30 Day Period.

-0.8% 0.8% -2.8% -2.1%

Gasoline Is A Zero Sum GameGasoline Is A Zero Sum Game

Bought Gasoline

No Gasoline Purchase Of the adult

population buys gasoline at least once each 30 days

b2b Solutions, LLC



OPIS Presentation NASC 2007 SOI

Industry Challenges - GasolineIndustry Challenges - Gasoline

Credit Card Fees– Credit card fee structure

» Varies by issuer» Card type

– OPIS numbers (May 28 news letter) – several MOC’s have issued temp drops in fees

– Range for ExxonMobil » MasterCard – 1.90% » AMEX – 2.90%

NACS / Merchants Coalition Fighting – In congress– U.S. has some of the highest interchange rates



Convenience / Gas Cigarette Category Five Year Sales

0%

10%

20%

30%

40%

50%

60%

70%

C-Gas Other Pack Outlets CTS Other Carton Outlets

2000 2001 2002 2003 2004 2005 2006

U.S. Cigarette Volume Trends - By Retail SegmentU.S. Cigarette Volume Trends - By Retail Segment



C-Store Visit FrequencyC-Store Visit Frequency

6.87 6.92 6.64 6.69

2003 2004 2005 2006

Source: The NPD Group / Convenience Store Monitor

Visit Frequency = Average Number Of Visits Individuals Make To A C-store In An Average 30-day Period.

-5.1% 0.7% -4.0% 0.8%

2007 Top Ten Categories(as a percent of in-store sales) 2007 Top Ten Categories(as a percent of in-store sales)

Category % Of In-store SalesCigarettes 34.4Packaged Beverages 13.8Beer 12.2Foodservice 12.1Other Tobacco 3.8Candy 3.7Salty Snacks 3.2General Merchandise 2.0Fluid Milk 1.9Packaged Sweet Snacks 1.5

Top 1088.5%

All Others11.5%

NACS 2007 SOI

Foodservice Category Analysis(18.4 Percent Of Total In-store Sales)

Foodservice Category Analysis(18.4 Percent Of Total In-store Sales)

FoodPreparedOnsite41.4%

Cold DispensedBeverages17.3%

PackagedSandwiches5.89%

Hot DispensedBeverages31.8%

FrozenDispensedBeverages3.5%

NACS 2007 SOI

The Players – Casey’sThe Players – Casey’s Rural Markets

– 62% of its stores in markets with less than 5,000 – Only 12% are in markets of 20,000 or more

Nine Midwestern States: Iowa, Illinois, Indiana, Kansas,

Minnesota, Missouri, Nebraska, South Dakota, and Wisconsin Product Selection - 1,800 SKU’s

The Players – Casey’sThe Players – Casey’s

Gasoline– Two grades of fuel (regular/mid-grade)– Avg. throughput 802,451 gallons

Uniform Stores – Total Cost $1.3MM – 2,720 sq, ft.

Store Generally Open 16 Hours (6 a.m. – 11 p.m.

The Players – The PantryThe Players – The Pantry Operates In Eleven States (Indiana, Kentucky,

Virginia, Tennessee, North Carolina, South Carolina, Georgia, Alabama, Mississippi, Louisiana, Florida)

Additional Fuel Brands (Chevron and ExxonMobil)

Stores That Sell Fuel – 1,014



Just Lost Two Key Executives– Regional head (Florida / Gulf Region)– Head of eastern North America operations

Uses Sale Leaseback As Part Of Acquisition Strategy



Six U.S. Regions (Midwest Region, the Great Lakes Region, the U.S. West Coast Region, Arizona, the U.S.

Southeast Region and the Florida and Gulf region) Operates 300 QSR’s (Incl. Subway, Dunkin’ Donuts,

Noble Roman’s, Quiznos, Blimpie)

Over 62% Of All Locations (U.S. and Canada) Offer Fuel

Goal Is More Proprietary Foodservice Store Size 2,000 – 2,500 sq. ft. New Stores 3,000 Sq. Ft. With 3,200 SKU’s

The Players – Susser Holding Corp.The Players – Susser Holding Corp. Store Locations

– Texas (306)– Oklahoma (19)

Store Open 24 Hours (321) Stores That Sell Fuel (323) Freestanding Stores (98%) Average Store Size (3,100 sq. ft.) New Locations (55 have 4,800 sq. ft.)

The Players – Susser Holding Corp.The Players – Susser Holding Corp. Has Used Sale Leaseback (74 locations /

$170MM)

Offers 2,500-3,000 SKU’s Purchases 40% Of Its Mdse. From McLane

Company Gasoline Brands (Valero – 90%+ / rest Shamrock,

Chevron, Exxon and unbranded)

Avg. Throughput – 1,243,000 Gal. Per Yr.

The Players – Delek USThe Players – Delek US States It Customizes Offer To Local Market 66% Stores Open 24 Hours / Remainder 16

Hours 79% Of Its Locations Are Corners Avg. Store Size 2,360 / 69%> 2,000 Sq. Ft. Same Store Merchandise Sales Up 2.9% 2006 Store Gross Margins 30.6% (Fueled By

Increase In Food And Fountain)

Private Label Products (Water, Bag Candy, Juices, Energy and Soft Drinks)

The Players – Delek USThe Players – Delek US Centralized Management New Offices Opened July, 2006 Operates 394 Stores (87% in Alabama, Tennessee and Virginia,

others in Arkansas, Georgia, Kentucky, Louisiana, Mississippi)

Signed To Purchase 107 Calfee Co. Sites Operates Stores Under Five Brands (MAPCO Express,

MAPCO Mart, East Coast, Fast Food Fuel and Discount Food Mart)

Just Developed New Upscale Format - MAPCO Mart– Expanded proprietary restaurant offer (Grille Marx) with

made-to-order grill sandwiches, premium coffees and walk-in beer caves

– Touch screen terminals at gas islands that allow customers to order food while fueling

The Players – Alon USAThe Players – Alon USA Centralized Management Retail Headquartered in Odessa, TXSigned To Purchase 107 Calfee Co.

Sites Purchase 55-60% OF In-Store MDSE.

From McLane Company Have Rights to License 7-Eleven Name

in West Texas and Majority of Counties in New Mexico

The Players – Alon USAThe Players – Alon USA Installing New POS System

GLGi: Convenience Retailing

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