Carolyn Schnare:
Welcome to Convenience Matters. I’m Carolyn Schnare with NACS and I’m joined today by my colleague and guest slash co-host…

Paige Anderson:
Paige Anderson with NACS

Carolyn Schnare:
Paige, thanks for joining me on this episode. So this is a topic I’ve spent maybe the last couple of years or so working on that I’ve also talked on this show, which is energy savings for convenience stores and other retail stores. This is applicable to just about anyone listening. So, but before I jump into that, I’d like to welcome back our other colleague, Patrick Loftus, who is the survey research and data visualization manager for NACS. Welcome back, Patrick.

Patrick Loftus:
Hey, Carolyn and Paige, thanks for having me on.

Carolyn Schnare:
We’ve been working on sustainability initiatives and resources for NACS for several years, and specifically with the folks at Environmental Protection Agency’s Energy Star program since 2019. So for the past year or so, we’ve been serving members on actual energy use. And we talked about that a few episodes ago as we were working to create the first-ever Energy Score for Convenience Stores. Well, that research has finally concluded and we have some early results that we wanted to share with you that we’re going to talk about today. And since we started that research all whole lot is accelerated in the U.S. and global stage, which is why my cohost Paige is a perfect addition to our triad here. We’ll talk a little bit about that later in the episode though, but let’s just jump right in and I want to start on that research report. I mentioned. When we started talking with Energy Star, we had to reckon with energy, heavy equipment, hot food, cold food, coolers, et cetera, in convenient stores and well, a very small footprint, right, Patrick? So they wanted to compare our stores with supermarkets and grocery stores or restaurants and QSRs, which is why we pushed for a convenience store-specific model. So as I continued to run into that, I figured let’s just start there with that. Patrick, would you mind giving us an overview of the survey, why we conducted it, what kind of information we collected? Really big question.

Patrick Loftus:
So our energy use survey was designed for a couple of reasons. First, we wanted to understand the landscape of energy use and convenience retail right now, and really help retailers benchmark their energy consumption relative to similar stores. So as you mentioned, Carolyn we know c-stores are very different from, from grocery stores, other retail locations, probably a little bit more energy-intensive too, for the confined space that they’re in. So that was the first thing was really to get some good benchmarks for c-stores. Second, we wanted to provide the NACS membership and the broader convenience industry with an understanding for the benefits of reducing energy costs and how retailers can get buy-in for reducing energy consumption. When it comes to store operations expenses, limiting energy use can result in dramatic for your business.

Patrick Loftus:
Something we’ll dig into a little bit here with more specifics. As far as the information we collected, the survey was very comprehensive. We had retailers provide us with a lot of detail around general store characteristics, such as a total store square footage, operating hours,, store age when was the last remodel for the store, what kind of services does the store provide? So everything from food service to EV charging to car washes. We then got into the number of energy using store equipment within the store itself. So a lot of refrigeration equipment, how many cooler doors were throughout the store how many freezers were there, open refrigeration space versus closed refrigeration space, how many beverages dispensers are there, and then a whole host of prepared food appliances from ovens to toasters to microwaves warmers a few others thrown in there. And then most importantly we got to towards the end of the survey was energy use from utility bills. So we look specifically at electricity, natural gas, and water use. So those are the three big ones. And we actually had folks provide us with their water usage for all of 2020 in terms of kilowatt-hours natural gases and therms, and then water usage in terms of gallons.

Carolyn Schnare:
So that’s a lot of stuff. I know this was a huge lift for our retailers. So those of you that participated, we really, really appreciate it. So this is the first time we’ve ever really collected that much expense data, if I’m not mistaken, correct, Patrick, in the State of the Industry Report that NACS puts out every year. We talk more about sales, we do a little bit on utility, but not to this extent.

Patrick Loftus:
Yeah, that’s exactly right. So from our State of the Industry benchmarking report, that’s fairly high level. We know from that State of the Industry benchmarking that utilities expenses do represent the fourth-highest direct store operating expense. So certainly not insignificant by any means. Really what that comes down to is that any reduction in that expense could result in substantial savings for the retailer’s business. So what that looks like from a cost standpoint…so the average score size that was included in our benchmark was a little bit higher than your average convenience store. So keep that in mind here, it averaged about 4,200 square feet. And we took a look at the actual expenses for electricity, water and natural gas. The average values came out to about $3,880 per store, per month for electricity water runs a store about $424 on average per month. And then natural gas was about $248 per month. Keep in mind for natural gas, that could be zero for some stores if their heating is provided via electricity or if they simply don’t have a lot of foodservice, that maybe has a gas stove. So I’m sure just looking at those numbers, I’m sure a lot of you are kind of thinking, ‘hey, I’ve got a lot of old equipment out here, whether it’s refrigeration units, AC and heating expenses, that could contribute to a large portion of the monthly operating budget.

Paige Anderson:
Patrick, I have a follow-up question for you. I know that in the past, when you look at operating expenses for a retailer, the first one’s always labor, the second one tends to be swipe fees, credit card fees, and the third one has always tended to be utilities, but in the latest report, it’s gone to the fourth leading cost. I’m just curious what may have accounted for those reduction in utility cost?Has it been COVID, has it been the economy, has it been straight-up usage or the cost of utilities has gone down?

Patrick Loftus:
Yeah, we’ve seen over the last two or three years it really has stabilized. And so I noticed a slight increase in terms of the cost for the energy use within the store. As far as why that might be the case. I don’t think it’s necessarily because the energy has become less expensive the last few years. I think in 2020 in particular with a few stores being closed maybe later hours. And there are a lot of retailers turning off during that third shift when there were just not as many customers that could have resulted in a little bit less energy use. And I think maybe just a little bit more of retailers being cognizant of their energy expenses has kind of helped stabilize that.

Paige Anderson:
Now, if you look at energy reports, obviously with the economy opening back up there are a lot of local and state regulations that are really pushing for more electricity use. So demand for electricity is going to go up as utilities look to modernize the grid and expand their generation, the way they do that as they raise everybody’s electricity costs. So though utility prices have stabilized the last couple of years, that’s probably not the long-term expectation of utility costs. It’s most likely going to go up wouldn’t you anticipate?

Patrick Loftus:
I would, yeah. You know, especially as you see with inflation costs rising across the country for really almost anything, I think energy costs certainly will play into that as well. And so really any reduction from an energy consumption standpoint that retailers can do should pay big dividends down the road. We took a look at with this research is that even if you took all those energy expenses, I mentioned a moment ago kind of got into saying if we just reduced our energy expenses by just 10%, that could result in savings of about $5,400 per year, per store. So, pretty significant.

Carolyn Schnare:
And Patrick, well, actually what you said too, Paige, in this report, which as I’ll share the link of where to find that in this show notes later on, too, that you can go see this for yourself, but the number one finding that you reported was that just people, or I guess we should say leadership owners don’t believe that lowering energy cost is really something they should worry about, but you found that they should, because it does, like you just said, save almost 10%, sometimes more. We gave some examples of 7-Eleven, for instance, changing out to LED light bulbs saved them thousands of dollars. And that might be…that’s probably a low-ball estimate too. So you found an unwillingness…well, I wouldn’t say unwillingness but just a lack of education…knowing that just doing some simple things could help you save a whole lot of money.

Patrick Loftus:
Yeah, exactly right. And ultimately, I think I forgot to mention this at the outset, but really what all this data will also go towards is creating the first Energy Star Certification for Convenience Stores. And so I’m sure a lot of you listening are familiar with that blue Energy Star logo that you see on a lot of home appliances. And we’re looking to take that same concept to convenience retail outlets. And typically what an Energy Star program has seen so far is that those commercial buildings where certification is in place right now are those Energy Star certified buildings are typically about 35% less energy use than non-Energy Star certified buildings, that 35% could actually result in savings of about $19,000 per store, per year. So again, quite a big potential savings there.

Carolyn Schnare:
And customers like to see it, they recognize that they…I mean, I know when I’m buying a microwave for instance, or actually no, that’s a bad example because microwaves, for some reason, aren’t under the Energy Star rating. Sorry, that was a bad example because I just bought a microwave, which made me think of that. But, and I was looking for Energy Star, but then I looked on their website and see that they don’t have that. But if you go to Energy Star, you can find different appliances, whether it’s commercial or even for home use that are Energy Star rated. So like we all probably know by now at least here in the U.S. that you want to buy a new washing machine, if it has the Energy Star rating it’s been tested and approved for a lower cost, lower energy use and everything like that.

Carolyn Schnare:
So if – I forget the number off the top of my head, but it’s something like 90% of Americans surveyed recognized Energy Star – so if you’re walking into a convenience store and you see an Energy Star rated sticker on that door or on that wall or in that building, you’re gonna be like, ‘Hey, that’s cool, good for them.’ And now I’m going to challenge you all to look for that Energy Star rating today and count the number of times you see Energy Star on something you see in one day and then urge your local convenience store to do the same thing. So we’ll have more information about when that Energy Star rating will come out, and I think Patrick, do you know when we might see stores being able to apply for the Energy Score or Energy Star rating?

Patrick Loftus:
Yeah. We’re hoping for about August, September of 2022. So as the EPA is crunching all the numbers, that’s kind of the target that we’re shooting for right now.

Carolyn Schnare:
So Paige, talk to us about Energy Star. I know you’ve been working on the policy side of things for, well, always, and I know you work with a lot of folks on Capitol Hill, which is important for advocacy and for our retailers. What could this mean for retailers when we have a greater, I don’t know what to say, like kinship with EPA and work with energy work.

Paige Anderson:
That’s the great thing about the convenience industry and I’m fascinated by the findings in the survey, great survey work that Patrick did. Oftentimes in our industry we’re 64% single store operators. And so sometimes when you talk about energy efficiency and these sorts of programs, it can be intimidating for a small store operator. Well, what can I do? You know, it’s going to cost me a lot of money to make these changes, and I’ve got to retrofit all this stuff, I’m not sure I have the time and resources and what I found fascinating with the survey work that you did, Patrick. Sometimes it’s small changes that can make a big difference. And just having that awareness and willingness and the ease and having that information available to our folks makes it that much easier to transition and implement some of these great cost-savings and helps the environment to boot.

Paige Anderson:
So that’s what I have found fascinating. And when I talk with policymakers, and they think, ‘oh, you just sell gasoline and why do you guys care about the environment?’ And these types of programs, and a lot of the innovative things that our industry has done from offering EV charging, transitioning their lights to LED, all of these things help create a story that says we truly want to be partners in helping improve our climate and making the earth more sustainable. So programs like this are a great PR tool to talk about things we are doing proactively. So the whole industry imaging is a huge part of it. But then when we start looking at policies that Congress and other lawmakers are working on, we have that practical experience and we have the data to back us up, like with what Patrick’s doing. So, it’s kind of a one-two punch for us and so these types of activities and partnerships and survey work are just so vital when we’re talking with Congress.

Carolyn Schnare:
Speaking of which, Paige, you’re very into the details with fuel and energy and all of the operational things that Congress might be looking to regulate in the near future, or at least legislate in some form or another. We’ve been talking offline about ESG reporting and that’s possibly coming down the pike somewhere along the regulatory way. Is there anything coming up now? We’re here in middle-later 2021. Is there anything maybe coming up that we should keep an eye on that this taking stock of energy savings and even knowing, benchmarking where you are might help retailers down the road, especially as they start possibly seeing,whether it’s federal or even some state regulations coming their way?

Paige Anderson:
I definitely think ESG is a great topic for us so I’m going to follow up on that since you raised that issue, but with Congress and the White House passing an infrastructure bill as a huge priority, and part of the infrastructure package is looking at energy efficiency programs and looking at transitioning our transportation sector to electricity. And so building out more EV charging stations, looking at ways that you can make buildings more efficient, so whatever legislation may pass or policies may be looked at, one of the things could be incentives programs to encourage people to be more energy-efficient and use their resources wisely. So that’s number one and we’re making sure that those types of programs, whether it’s from a planning perspective or implementation perspective, that our industry has access to any of those types of incentives programs to make it easier.

Paige Anderson:
The second part of it, and this may seem there’s not a direct coalition, but as we’re looking to add EV chargers at convenience stores, their bottom line is that is an increase in electricity use. And so being able to know how you’re using electricity efficiently at your store is going to be a very valuable piece of information to have as you’re making operational decisions. So this work, this energy work may seem that it’s simply just about lights and refrigeration and the building and the windows and all those great things, but understanding your electricity usage is going to be super valuable as the transportation sector moves to more electricity. Beyond those types of incentive programs, as you’re seeing local and state policies move towards electrification, it’s going to become more and more imperative to have an understanding of your energy usage.

Paige Anderson:
So that’s my short,…it’s really about education awareness right now. But Carolyn, you brought up my favorite topic, ESG, the Environmental Social Governance and I think that’s really where the Energy Star program and participating in a program like this is going to be the most valuable. So whether it is…whether you’re a publicly held convenience store business or a privately held, the implications of ESG requirements are going to impact everybody, whether you’re large, medium or small, private or publicly held, if you’re publicly held, obviously the most obvious is your shareholders are wanting people to have more sustainable policies and you have to oftentimes have public reporting requirements on your usage of electricity and how you’re a better steward of the climate. So this type of program is going to be huge and putting together those records and really shedding a light on the positive things that we’re doing by participating in this program.

Paige Anderson:
But if you’re privately held, you may think, well, why does this really matter to me? Well, when you’re privately held, you still need to have access to capital and insurance and other financial tools. And as the private sector in these industries are requiring businesses when they apply for a loan or need capital or need to be insured, more and more, they’re putting ESG requirements in those loan applications. And so again, having a program like this just helps tell the story and to get a higher rating. So while that’s happening now, sort of on its own organically, you have Congress, particularly the House that has passed several ESG measures and reporting requirements, and while it’s unclear if it’s going to become law, you have agencies like SEC and other agencies that are more and more wanting to require these ESG tools. And so more and more having a program like this and having this information is going to make it easier for our folks to report those positive things they’re doing with the environment.

Carolyn Schnare:
Oh yeah, definitely. And I mean, even the step-cousin to ESG, which is a CSR report, we’re just throwing out all those TLA – three letter acronyms out here tonight – but the CSR reports that folks have, which is just telling your corporate social responsibility. And I think just telling your story really. And I think Patrick, you can even shed some light on this too, if you’re…let’s say you went through the whole survey, or even you read through the report, now Store A in so-and-so Virginia, we did this, we had this as our utility, everything, you can tell, even on your CSR report or on your website, say we are below the industry average for electricity usage, because we do this, that, the other thing – while we hope that you do have a certified store eventually down the road Energy Star certified store- this way, you can also just tell that story. Say, I’m benchmarking against industry average and we’re better than X, Y, Z, or we’re 3% lower or higher depending on the metric you’re looking at. I think that a lot of those things are really important. And we’ve talked about benchmarking on the show before and Patrick you’ve been on here talking about that and how you use State of the Industry report or the Compensation Report or all the wonderful tools that come out of NACS Research. This is another one of those that folks can really take a look at. So is there anything that stands out to you in this report that would help some folks look at this and maybe compare themselves. Now it’s not all apples to apples, I know you’re talking big stores, little stores, big footprints, foodservice, all that other stuff, but you took some different metrics and really broke it down in terms of employees and customer counts. Would you mind talking a little bit about that so then helping listeners think about their store, comparing it to those that you listed and you talked about earlier in the show?

Patrick Loftus:
So I think unsurprisingly energy use was higher for convenience stores over 4,000 or so square feet compared to those are a little bit lower. So some of those values sounded on the high side, keep in mind that the stores were a bit larger. So as Carolyn mentioned a second ago and what we try to do is normalize that a little bit, especially took a look at a few different ways to normalize that electricity value. One is looking is by per square foot. And what we found is that that came out to around 110-kilowatt hours per square foot. So keep that 110 number in mind when you’re looking at your electricity use on an annual basis and kind of averaging that down based off of the square footage for your store. So 110 is that number. On a per store hour basis, that came out to about 51-kilowatt hours as well. Then we even dug into what that means per customer and then per store FTE. So per customer, that electricity use was about 1.3 kilowatt-hours, and then per store FTE on an annual basis that ended up being close to about 124,000 kilowatt-hours per store FTE. So hopefully that can give you a few ways to normalize that data for your store.

Paige Anderson:
Patrick, if you could give one piece of advice from all that you’ve learned in this process to our retailers listening to this podcast, particularly perhaps maybe a smaller retailer, what would be the one piece of advice that they should do or, or resource they should use that could help them with this?

Patrick Loftus:
Yeah, really I’d say start small. I know we kind of mentioned the LED lighting a few times, just switching out those bulbs can make a big difference. So even those really minor differences can go a long way across the course of a year or even several years. So LED lighting is one thing And looking at the compressors within your refrigeration units is another. You see a lot of modern refrigeration equipment will have two compressors where one compressor can turn off when it’s not necessary so there’s small things that can be done there to make a big difference. Even motion-sensing controls for turning lights off for cooling certain units compared to others that motion sensing can help reduce energy costs as well.

Carolyn Schnare:
You also mentioned some of those energy-saving items in our…and I know I’ve brought this up many, many moons ago on a show…convenience.org/Energy Star. We have some other resources that the folks over there helped us put together, which is a guide that helps you even dig deeper into HVAC systems and parking lot lighting and all kinds of things like that. We do talk a little bit about EVs and charging and best practices for that as well. And there’s a cool thing called a Treasure Hunt, which you can walk on and literally hand your store employees a checklist and walkthrough and make them feel part of the process, too. Like, ‘hey, if we turned off this coffee maker between these hours because we’re not making coffee, we save this and that and the other thing.’ So it’s a convenience.org/Energy Star, you can find more of those hints, but also in the report that Patrick mentioned as well.

Paige Anderson:
So I have a question for both of you. As a retailer listening to this podcast and you’re talking about all the valuable data that’s been collected, we’ve talked about the resources, beyond somebody wanting to engage and participate in the program, is it too late for them to share their data with you all or with EPA?

Patrick Loftus:
So not too late, no. We are still accepting responses and looking to build out that Energy Star Score In particular, if you’re located in the Southwest of the U.S., California as well or in new England, particularly looking for responses from stores in those areas. So I know your submission will help go a long way, really, towards developing that Energy Star Score.

Carolyn Schnare:
I mentioned, too, thanking the 150-plus stores that have submitted data, I wanted to also thank – if you look on our page – you’ll see that GreenPrint, which is a partner within our industry, offered to donate five trees for every store survey completed. So thanks to them, we’ll be planning a lot of trees. So we’ll also be giving back to the communities that are our store serve, too. So thank you to them. But thank you to those {stores} – and those coming in still – for submitting store surveys, because it’s always good to have a lot of data, a lot of different size stores, a lot of different…whether they sell gas and everything else, as well as the regions, because that data and that regional data really helps. Because like you said, it’s or in the report, it says there’s hotter places, there’s colder places, there’s different levels of use. And when you do start to benchmark that within Portfolio Manager, which is the EPA’s database for collecting this information, it needs to compare that against stores in the region and energy use in the region. So like a really hot area like Florida, the normal range might be different than what it is in, I don’t know, New England. So Patrick, where can we find this specific report on our website again, if you don’t mind telling everybody?

Patrick Loftus:
Sure. So we should have this up soon it’s at convenience.org/research for the report

Carolyn Schnare:
And then Paige where can folks find information as it comes out when something breaking news comes out of the Hill, which isn’t usually breaking too often, especially as we’re moving slowly along the sustainability route, but what are some places people can keep an eye on?

Paige Anderson:
Well, the first place is, make sure that you’re getting your NACS Daily each and every day. That’s where the breaking news tends to go first. And then the other piece of it is make sure that feel free to reach out to the government relations team at NACS. Any one of us are more than happy to talk issues with you. I can be reached at [email protected]. Or if you go to our website, convenience.org and you click ‘issues’ that’s another resource for you.

Carolyn Schnare:
[Music] Perfect. I will put all these in our show notes so you didn’t have to scribble while you’re driving or riding or running or doing whatever you do right while you’re listening. But we do thank you. I thank you, Patrick, for being a guest and Paige for being a guest co-host. And I look forward to working with you both again, and thank you so much for listening to Convenience Matters.

Convenience Matters Outro:
Convenience Matters is brought to you by NACS and produced in partnership with Human Factor. For more information, visit convenience.org.

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