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At Sheetz, gas is secondary to food sales

| Monday, Dec. 23, 2013, 11:09 p.m.
Sean Stipp | Tribune-Review
Stan Sheetz talks about the success of the family-owned business in the Blairsville store.
Sean Stipp | Tribune-Review
Stan Sheetz is chairman of Altoona-based Sheetz Inc., an operator of more than 460 gas station and convenience stores in six states. Sheetz was CEO of the family-owned company from 1995 until Oct. 1, when he was succeeded by his cousin, Joe Sheetz.
Sean Stipp | Tribune-Review
Sheetz chairman Stan Sheetz looks over the beverage selection in the Blairsville store.

Gasoline may bring them in the door, but everything about a Sheetz store is geared toward filling customers' bellies after they top off their tanks.

“We look at ourselves as primarily a purveyor of food,” Stan Sheetz, chairman of Altoona-based gas-and-convenience store chain Sheetz Inc., said this month during a tour of one of his company's stores in Blairsville.

Sheetz, who was CEO from 1995 until October and oversaw growth from 195 stores when he took the helm to more than 460 today, waved a hand across the expanse of the store, pointing to shelves stocked with snacks, coolers full of drinks, and the kitchen where workers prepare made-to-order sandwiches, coffee drinks and other food.

Nearly everything sold inside a Sheetz store can be consumed within minutes of walking out the door.

“Take a pie chart and label it ‘share of stomach,' ” Sheetz said as explanation of the company's strategy. “I want a bigger share of your stomach.”

Profit margins on fuel sales have been slim for decades — leading to the rule of thumb for gas stations that 70 percent of revenue may come from fuel, but only 35 percent of profit.

Few companies in the business have chased that piece of the profit pie as relentlessly as Sheetz.

“Sheetz, everything they do, is focused on food and delighting customers inside the store,” said Jeff Lenard, a spokesman for the National Association of Convenience Stores, an Alexandria, Va. trade group. “You really make your money in the store.”

Drinks and sandwiches are key. “People only shop for gas a few times a week,” he said. “You may get them a couple times a day if you offer them food.”

Like many companies in the convenience store industry, Sheetz started out as a dairy, producing milk for home delivery and a few company-owned stores. By the 1960s, with home delivery waning, the stores became essential to getting its milk to consumers.

In the late 1970s, the family sold the dairy to focus on the burgeoning convenience store market.

To illustrate the change in the business, Sheetz pointed to the more than one dozen drink coolers.

“When I started in this business in the '60s, it was two cooler doors and most of it was milk,” he said. “Now we have 400 different individual beverages.”

The stores have more than doubled in size, averaging about 2,400 square feet in the 1970s to about 6,000 square feet today, he said.

As a family owned business, Sheetz doesn't release profit figures. But its revenue has jumped 35 percent in the last two years, rising from $4.9 billion in 2011 to an expected $6.6 billion this year.

It's adding about 30 stores a year on average and will have 466 by January, putting it in the top 15 in the nation for number of convenience stores, Lenard said.

“They're a big player,” he said.

Burt Flickinger, managing director of Strategic Resource Group, a New York retail consulting firm, predicts Sheetz will have 1,400 stores in the next 15 to 20 years.

Flickinger and Lenard consider Sheetz and Wawa Inc., also a Pennsylvania-based convenience store chain, to be among the top chains when it comes to growth and a focus on quality convenient food.

Wawa, which is based near Philadelphia and has more than 600 stores in New Jersey, Pennsylvania, Delaware, Maryland, Virginia and Florida, appears to be concentrating its expansion south along the Interstate 95 corridor, Flickinger said. On the other hand, Sheetz will likely continue expanding west and south from Western Pennsylvania, he said.

“There's plenty of room for both companies to have exceptional growth,” he said.

Sheetz also faces competition from GetGo, the chain of more than 160 gas stations owned by O'Hara-based grocery chain Giant Eagle Inc. Outside of the city of Pittsburgh, where space for sprawling gas stations is tight, GetGo has been building larger stores that also include made to order food.

At the Blairsville store, Sheetz pointed out an area under renovation, where workers were installing high-volume coffee makers along with a handful of machines that allow shoppers to customize their Java with a variety of creamers and flavoring. They were putting in a self-serve frozen yogurt kiosk, complete with toppings.

“People want to be in control,” he said. “We're trying to find any way we can to get people the food they want.”

That started in the late 1980s with the addition of made-to-order sandwiches, Sheetz said. In the mid-'90s, they added touch-screen ordering, which Sheetz described as a revolution in the business.

The company is adding drive-thru windows at about half its new stores.

“Everybody's in a hurry,” he said.

Alex Nixon is a staff writer for Trib Total Media. He can be reached at 412-320-7928 or anixon@tribweb.com.

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