Casey’s General Stores: Fueling Convenience - [Business Breakdowns, EP.125]

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Aug 23, 2023

Markus Hansen, a portfolio manager and senior analyst at Vontobel Asset Management, dives into the world of Casey's General Stores, the third-largest convenience store chain in the U.S. He discusses the competitive landscape and how Casey's stands out with its fresh food offerings and operational efficiency. Markus explains the intricacies of fuel supply dynamics and the importance of store aesthetics in attracting customers. He also highlights strategic growth through acquisitions and the challenges posed by the rise of electric vehicles, emphasizing adaptability and brand loyalty for future success.

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INSIGHT

Casey's Niche

Casey's, the third largest convenience store chain in the US, focuses on fresh food and pizza.
It started by targeting small, rural towns underserved by larger chains, similar to Walmart's early strategy.

INSIGHT

Convenience Store Market Fragmentation

The convenience store market is geographically fragmented, with many mom-and-pop chains.
Factors like EPA rules, labor costs, and technology investment drive consolidation, favoring larger chains.

INSIGHT

Casey's Community Focus

Casey's focuses on suburban communities rather than highway traffic, building a loyal customer base.
They offer a familiar brand experience, convenience, and good value, attracting non-gas-related traffic.

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Today we are going into the land of convenience stores to break down Casey's General Stores. Casey's currently operates in 16 states in the Midwest and Southern US. As of this recording, they have close to a $10 billion market cap and are the number three player in their market.

To break down Casey's, Matt Reustle is joined by Markus Hansen, portfolio manager and senior analyst at Vontobel Asset Management. We cover the industry of convenience stores, including the competition that exists in this market and the unique geographical considerations. We also discuss the financial model, drivers of gasoline performance versus in-store purchases, and margin profiles across the different segments of this business. This is another fascinating story hidden in plain sight. Please enjoy this breakdown of Casey's.

For the full show notes, transcript, and links to the best content to learn more, check out the episode page here.

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Show Notes

(00:02:42) - (First question) - The concept of Casey’s General Stores

(00:06:04) - Casey’s competitors and the market share in different regions

(00:10:52) - The main differences between Casey’s and a regular gas station

(00:14:09) - A brief history on Casey’s beginnings and its founder

(00:17:25) - A breakdown of the business’ revenue

(00:19:14) - Casey's growth despite the changing environment standards raising operational costs

(00:23:52) - The business’ margin profile

(00:26:53) - How Casey’s General competes with its peers and fuel pricing

(00:29:33) - The focus for Casey’s with regards to expansion opportunities

(00:33:06) - The hurdles involved with building new gas stations versus acquiring existing stores

(00:35:08) - Casey’s stance on franchising

(00:38:02) - The company’s attractiveness to buyers

(00:40:52) - Casey’s General’s average stock performance

(00:44:26) - Key risks of Casey’s

(00:47:30) - The main lessons learned from Casey’s General Stores

Important Information:

Information provided represents the views of a company of the Vontobel Group (“Vontobel”) and should not be considered investment advice and/or legal, tax, financial or other advice. Further, not a recommendation to purchase, hold or sell any investment and no representation is given that the securities discussed are suitable for any particular investor.

Although Vontobel believes that the information provided in this document is based on reliable sources, it cannot assume responsibility for the quality, correctness, timeliness or completeness of the information contained in this document.