WEBVTT - Casey's CEO on Building Toward the Future

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<v Speaker 1>You're listening to Bloomberg Business Week with Carol Messer and

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<v Speaker 1>Tim Stenebek on Bloomberg Radio.

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<v Speaker 2>We've been talking a lot with We talked with the

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<v Speaker 2>CEO of Smuckers earlier, we talked about General Mills. We're

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<v Speaker 2>talking a lot about food and the food space today.

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<v Speaker 3>It's been well in the last few days, right because

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<v Speaker 3>Kellogg's also had a great day after Gold and Sacks

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<v Speaker 3>upgraded them. So there's been some up and down arrow stories,

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<v Speaker 3>but it's a it's a hot issue right now.

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<v Speaker 2>Well, take a look at shares of Casey's General Stores

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<v Speaker 2>up three point four percent today, up two percent in

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<v Speaker 2>yesterday's trade. And we've got the CEO of the president

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<v Speaker 2>and CEO in our studio here, Darren Rebella's is with us.

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<v Speaker 2>They're based in Iowas. Doc is up about six percent

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<v Speaker 2>year to date. Welcome, Welcome, thank you, thank thanks for

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<v Speaker 2>having me here on Bloomberg. Tell us a little bit

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<v Speaker 2>about what you are seeing when it comes to consumers

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<v Speaker 2>and what they're doing, and remind everybody about where you

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<v Speaker 2>guys have your stores.

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<v Speaker 1>Sure, yeah, we're we have twenty five hundred stores focused

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<v Speaker 1>in the Midwest and sixteen Western states. And about half

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<v Speaker 1>of our stores are in rural communities, towns of five

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<v Speaker 1>thousand people or less, and so in those communities we

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<v Speaker 1>play a number of roles. We're the third largest commedian

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<v Speaker 1>store chain in the US, and so we supply basic

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<v Speaker 1>needs and groceries and that sort of thing. We're also

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<v Speaker 1>the fifth largest pizza chain in the US, so we're

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<v Speaker 1>the pizza area. And in about fifteen hundred of our

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<v Speaker 1>stores we have full liquor licenses, so we're also the

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<v Speaker 1>liquor store. So we wear a lot of hats and

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<v Speaker 1>serve a lot of needs in those community.

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<v Speaker 2>Open twenty four hours.

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<v Speaker 1>In some of our stores. Yeah, but as you can imagine,

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<v Speaker 1>in some of those more rural communities, there's not a

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<v Speaker 1>lot happening between midnight and.

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<v Speaker 2>Four in the morning, or there is sometimes.

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<v Speaker 1>We don't want to be involved in.

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<v Speaker 3>So the ticker is I don't think the year to

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<v Speaker 3>date move really tells the story because I look over

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<v Speaker 3>the last five years and you've gone from one hundred

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<v Speaker 3>dollars to two thirty five, so you've drastically outperformed the

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<v Speaker 3>S and P five hundred. Of course, you're Nasdaq listed

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<v Speaker 3>and the taker is c as Y that's right. It's

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<v Speaker 3>it's interesting to be because of you have a rural presence.

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<v Speaker 3>You're a very big company that a lot of people

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<v Speaker 3>on the coasts maybe haven't heard of. Right, So does

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<v Speaker 3>that make it harder to tell your story to shareholders?

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<v Speaker 1>You know, we just have to continue to tell it.

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<v Speaker 1>And you know, we always invite shareholders to come to

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<v Speaker 1>where our store support center is in Ancone, Iowa, and

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<v Speaker 1>we can show them around, and we've done that a

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<v Speaker 1>number of times. But yeah, I mean, people don't run

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<v Speaker 1>into cases in their day to day lives, so we

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<v Speaker 1>have to explain to them. And in certain markets, I'll

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<v Speaker 1>take New York as an example, you wouldn't find anything

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<v Speaker 1>that even resembles the cases here, so when we describe it,

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<v Speaker 1>it takes a little bit of work.

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<v Speaker 3>But yeah, because you said, you have your own kitchens

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<v Speaker 3>in the stores, so they make their pizza dough from scratch,

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<v Speaker 3>and it's not when I think of convenience store, that's

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<v Speaker 3>not what I think of that's right.

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<v Speaker 1>Yeah, So we really kind of consider ourselves in a

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<v Speaker 1>category of one because we have those unique attributes, that

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<v Speaker 1>rural footprint, you know, our grocery, our alcohol and liquor,

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<v Speaker 1>our pizza business. We really are unique in that respect.

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<v Speaker 2>So does it make sense to kind of just continue

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<v Speaker 2>along those lines? Like I said to.

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<v Speaker 1>You, you know you're not here in New York.

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<v Speaker 2>Would you come to the New York metro area?

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<v Speaker 1>Well, the way we focus our development for the moment

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<v Speaker 1>is we have three distribution centers as we supply all

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<v Speaker 1>of our own stores, and so we look initially at

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<v Speaker 1>the effective distribution radius around those and so we know

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<v Speaker 1>we can continue to build a lot of stores in

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<v Speaker 1>that geography. In fact, of our twenty five hundred stores,

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<v Speaker 1>two thousand of them are in only nine of the

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<v Speaker 1>states we operate in, and so we still have plenty

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<v Speaker 1>of white space. So it's not that we would never

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<v Speaker 1>come to in New York, but we would probably do

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<v Speaker 1>something a little more upstate if we were ever to

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<v Speaker 1>get to that point.

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<v Speaker 3>So how have you dealt with inflation? How have your

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<v Speaker 3>consumers been dealing with this? With this inflation?

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<v Speaker 1>You know, I would say, so far, so good. Our

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<v Speaker 1>guests have proven to be pretty resilient. What I tell

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<v Speaker 1>you about the demographics of our guests. Three quarters of

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<v Speaker 1>our folks make fifty thousand dollars a year or more.

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<v Speaker 1>And while I know that doesn't sound like a lot

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<v Speaker 1>in New York. In the states where we operate, that

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<v Speaker 1>goes a long way. In fact, if your rank ordered

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<v Speaker 1>all the states in the US in terms of cost

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<v Speaker 1>of living, the most expensive state we operate in is

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<v Speaker 1>ranked twenty second.

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<v Speaker 2>Interesting do you think about that in terms of where

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<v Speaker 2>you want to open?

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<v Speaker 1>Well, we factor in a lot of things of where

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<v Speaker 1>we want to open the economy, and cost of living

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<v Speaker 1>is definitely one of those that fit into the equation.

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<v Speaker 2>Talk to us a little bit about your new three

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<v Speaker 2>year strategic plan, because I was looking at RBC Capital

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<v Speaker 2>Markets put out a note today saying Casey's General Stores

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<v Speaker 2>tone edits Tuesday investor day was constructive, and they talked

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<v Speaker 2>about that new three year plan realistic and constructive. And

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<v Speaker 2>we did say. The stock was up I think four

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<v Speaker 2>percent or so at its highs today. What is that

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<v Speaker 2>new three year plan?

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<v Speaker 1>Yeah, you know, we've had a long track record of

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<v Speaker 1>success in our company, and the last three or four

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<v Speaker 1>years is really accelerated. But we've done that through a

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<v Speaker 1>couple of ways. Our growth algorithm is pretty simple. We

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<v Speaker 1>get about half of our growth from what we call

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<v Speaker 1>the mothership, the base business, driving same store sales, improving

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<v Speaker 1>the base business, and then the other half is from

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<v Speaker 1>new unit development. And so that three hundred and fifty

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<v Speaker 1>stores really represents a bit of an acceleration, but really

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<v Speaker 1>a continuation of where we've been for the last few years.

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<v Speaker 1>And we'll do that through a combination of organic growth

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<v Speaker 1>and acquisitions. And our industry is highly fragmented. About ninety

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<v Speaker 1>five thousand of the one hundred and fifty thousand commenced

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<v Speaker 1>stores in the US or operate and change at ten

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<v Speaker 1>stores or less. Yeah, and as you can imagine, with

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<v Speaker 1>the inflationary pressures and supply chain issue everything else that

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<v Speaker 1>we've all been dealing with, those smaller operators really struggle.

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<v Speaker 1>So provides a great opportunity for us to acquire and

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<v Speaker 1>operate those stories.

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<v Speaker 2>Help us always supply chains, because I feel like they've

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<v Speaker 2>eased and gotten better. Are they back to where they

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<v Speaker 2>were pre pandemic?

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<v Speaker 1>I would say for the most part, yes, Okay, I

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<v Speaker 1>mean it's gotten significantly better from where it was twelve

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<v Speaker 1>eighteen months ago. There's still some lingering things on certain

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<v Speaker 1>things like tractor trailer trucks have still been delayed. You know,

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<v Speaker 1>some things that require chips have a little bit longer

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<v Speaker 1>lead times, but for the most part, we're about back

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<v Speaker 1>to normal.

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<v Speaker 2>Just trying to understand, you know, as inflation has certainly

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<v Speaker 2>settled back in the past twelve months, but we still

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<v Speaker 2>have a ways to go, and you still hear about

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<v Speaker 2>inflationary pressures. I mean, I feel like I'm still paying

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<v Speaker 2>a lot for a lot of stuff, and I'm trying

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<v Speaker 2>to understand kind of whether you guys are seeing these

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<v Speaker 2>pressures as well. Is wages also a decent pressure right now?

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<v Speaker 1>Still for you you know, that's moderated. You know, we

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<v Speaker 1>after you know, the peak of COVID, we saw a

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<v Speaker 1>real acceleration in wages that is somewhat moderated a bit.

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<v Speaker 1>But you know, what we've really been focused on is

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<v Speaker 1>is employee engagement in retaining the team members that we have.

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<v Speaker 1>And so if you looked at our results over the

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<v Speaker 1>last year, we actually had a reduction in same store

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<v Speaker 1>labor hours and it was really driven by the fact

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<v Speaker 1>that we reduced our turnover, so we had twenty percent

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<v Speaker 1>reduction in overtime, twenty percent reduction and training hours and

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<v Speaker 1>really focused on making the job in the store easier

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<v Speaker 1>so we relieve some of that pressure and so we

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<v Speaker 1>don't have to throw money at people. We want to

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<v Speaker 1>take care of them. We paid people fairly but also

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<v Speaker 1>making their job easier close along one.

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<v Speaker 3>So the culture is extremely important to you.

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<v Speaker 2>Absolutely, and so they get benefits and everything. Yes, yeah, yes,

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<v Speaker 2>Sam in our control room wants to know if you're

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<v Speaker 2>going to run for political office.

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<v Speaker 3>We've all taken a poll and decided that we would

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<v Speaker 3>vote for you.

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<v Speaker 1>Yeah. Well, there's probably fewer things I'd want to do

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<v Speaker 1>less in office.

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<v Speaker 3>I could understand that I was an infantry guy in

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<v Speaker 3>the Army, so I've done some pretty nasty things.

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<v Speaker 1>I'd rather do that than run.

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<v Speaker 3>For Talk to us about the pizza, because we hear

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<v Speaker 3>it has a bit of a cult following. We already

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<v Speaker 3>talked about the fact that it's handmade pizza. Is it's

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<v Speaker 3>here in New York. It's important, you.

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<v Speaker 1>Know, Yeah, it's well, it's it's iconic and we've been

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<v Speaker 1>doing it since the eighties, so we've got a long

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<v Speaker 1>track record. What what what I think is really cool

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<v Speaker 1>One is that we make it from scratch and we

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<v Speaker 1>use really quality and green so one hundred percent whole milk,

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<v Speaker 1>mozzarella cheese. Now you you kind of think well, doesn't

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<v Speaker 1>everybody do that? But no, most people don't. None of

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<v Speaker 1>the large chains do. They use low fat mozzerrea because

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<v Speaker 1>it's cheaper. We don't do that. We we put extra

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<v Speaker 1>cheese on the pizza. So it's not a thing to

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<v Speaker 1>get to order extra cheese on your pizza from a

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<v Speaker 1>Casey's because you don't need it. But what really sets

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<v Speaker 1>us apart is our breakfast pizza. And it's not pizza

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<v Speaker 1>for breakfast, it's breakfast pizza. And so we have people

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<v Speaker 1>coming into our stores every day.

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<v Speaker 2>What's that a breakfast pizza.

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<v Speaker 3>Oh, it's bacon and eggs, bacon, eggs, sausage, cheese, and

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<v Speaker 3>then more cheese.

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<v Speaker 1>In fact, in the fall we had a lot of

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<v Speaker 1>fun our pizza turned. Our breakfast pizza turned twenty one

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<v Speaker 1>years old, and so our culinary team was doing some

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<v Speaker 1>research what can we do and they found the beer

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<v Speaker 1>cheese is on trend.

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<v Speaker 2>I knew it.

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<v Speaker 1>So they created a beer cheese sauce to put on

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<v Speaker 1>the breakfast pizza. But then they leveled it up because

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<v Speaker 1>when we do these things, we want to tie into

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<v Speaker 1>the culture and so bush Light beer is a huge thing.

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<v Speaker 1>We sell more bush Light beer than any retailer in

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<v Speaker 1>the country.

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<v Speaker 2>Darn Rebel is always a pleasure. Appreciate it. CEO at

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<v Speaker 2>Casey's General Stores