Loop Comes Full Circle

John Lofstock
January 22, 2019
CSDecisions
With an emphasis on upscale foods, an elegant design and convenience, the California chain is changing the perception of the neighborhood market.
Vintners Distributors has been in the convenience store business for four decades. The industry has evolved immensely during that time as it embraced self-service gasoline, foodservice and alternative fuels. But even those big changes seem to pale in comparison to the monumental shift in consumer demands we are experiencing today.
Generations Y and Z are leveraging technology to change the way they purchase everything from a breakfast sandwich to an automobile. They want fresh, healthy foods on their schedules, and they want it fast. The younger generation doesn’t just expect great service; they expect to be your partner in return for their loyalty. They want to be dazzled by the experience, regardless of price. And perhaps most importantly, they have the power of social media to let the world know when they are happy with your brand, and when they are not.
Varish Goyal understands these new retailing challenges as well as anyone. Goyal is the president of Fremont, Calif.-based AU Energy, a joint venture between his family’s Vintners Distributors and Shell Oil. Nestled in the heart of Silicon Valley, his customers include many of the men and women who make the biggest technology companies in the world tick.
To help meet consumer demand, Goyal developed the Loop convenience store chain in Northern California. On a macro level, Loop has what it takes to succeed. Great corners in busy commuter markets. But it separates itself on a micro level. Loop is turning heads with its new kind of convenience store experience. The brand features a host of unique offerings not found in your average convenience store.
For example, Loop boasts higher quality products, such as salad bars that feature fresh soups; an elegant store design with warm earth tones; upscale displays that feature wine, cheese and crackers; frozen yogurt; French pastries; and coffee and espresso bars. This variety is complemented by traditional convenience store items to ensure there is something for everyone.
Loop was built on the philosophy that nutrition and convenience should not be mutually exclusive. To do this, Goyal set out to change the conventional image of convenience stores in order to redefine what he thought should be a one-stop shop.
“Loop was created out of our desire to redefine convenience stores. We looked at the landscape of convenience stores at the time and determined what was missing,” Goyal said. “Most stores were really only offering products that targeted the male audience, so Loop was created with females and Millennial customers in mind.”
As with all real estate, location plays a crucial role in Loop’s retail strategy.
“We are in a great market that pulls customers from San Francisco to San Jose,” Goyal said. “We see a lot of fresh-out-of-college graduates who are moving to the area and getting jobs with companies like Facebook, Apple and Google. They tend to want a more exciting retail experience. They are on the cutting edge in their fields so they identify with our offering, which also is about the user experience and a real upscale offering.”
Poised for Growth
The first Loop store opened in Santa Clara, Calif. in June 2013. Since then, the brand has expanded to approximately 30 stores throughout Northern California, with three new units currently under construction.
Loop accounts for about 20% of Vintners retail portfolio. The company operates 130 total locations, 118 of which are in Northern California with the rest situated in Southern California. The 100 non-Loop stores feature Shell or Chevron fuel in the forecourt with generic convenience store brands. This is where Goyal sees the company’s biggest opportunity.
“Part of our strategy going forward is to evaluate our network and do raze and rebuilds of generic sites. Initially, we were taking small stores with big pieces of property, tearing them down and optimizing them,” Goyal said. “Now, we’re slowly starting to run out of those projects because land in this market is limited. Over the next year, our main focus will be to take the stores that are already bigger in size and convert them to Loops.”
While AU Energy distributes to roughly 60 dealer sites from San Jose to Los Angeles, Loop will remain a corporate brand, Goyal said. “There is still so much to learn about perfecting the brand and executing, so trying to franchise this model or rolling it out to dealers wouldn’t be a smart move right now.”
While Goyal was hesitant to commit to converting all of his sites under a singular Loop brand, he does plan to be aggressive rolling out the brand wherever possible.
“The biggest issue for us is converting smaller stores. Some of these sites can’t fit all of the core Loop offerings, which is why we are creating Lil’ Loop,” Goyal said. “These smaller sites will incorporate some of the Loop offerings, while maintaining great service and a strong location.”
For Goyal, consolidating under a main brand is as much a big-picture business strategy as it is a retail decision.
“We want to get our brand out into the market and get some penetration so people know who we are and what we do. That adds value to your company as a whole and helps to create an exciting retail environment that customers can enjoy,” he said. “To do that, we need a brand that people recognize and see every day—a brand they can grow to trust. When you have multiple brands, you lose that connection with the customers.”
While it’s still early, this decision is resonating in the market. “What we are finding is that consumers really like the offering. We still have to do a better job of educating customers about who we are on a wide scale, but we have gained traction because of the quality of what we are selling and the great service we provide,” Goyal said. “In fact, one customer described Loop by saying, ‘If Shell and Whole Foods had a baby, Loop would be the product.’ That’s honestly what we are trying to achieve.”
Coming Full Circle
The Loop name itself is a play on the chain being a part of the customers’ daily lives.
“Consumers, especially in California, are not used to seeing things like healthier options at convenience stores,” Goyal said. “This is where educating consumers is so important. We have to drive customers into the store and let them know we have something for everyone.”
As such, stores offer free Wi-Fi and seating. The chain’s Loop Back loyalty program also plays into this strategy.
As part of his expansion plans, Goyal has been building a team internally. While AU Energy is a family business, the company is adding positions on the foodservice and technology teams. “Foodservice is crucial to our future so we very much want to get to the next level,” he said. “This requires a lot of work behind the scenes because we don’t have a lot of space or kitchens to simply add new items to the menu. We have to be calculated and stay smart enough to introduce items that we can do well on a consistent basis.”
For example, beyond the soup and the salad bar, Loop offers a growing pizza program, but it uses frozen dough. “Eventually, we would like to make dough from scratch, but that may not be possible because of space limitations, but again, it’s about getting used to doing foodservice the right way,” Goyal said. “We will focus on getting it right, how to manage spoilage and how to market it to consumers. Once we become experts at executing, we will use those skillsets to move to the program forward.”
Being located in such a tech savvy market, Goyal is keenly aware of the shifting demographics that show a rise in Gen Y and Gen Z eating out more. This is driven in large part by convenience, which also helps to explain the rapid rise in popularity of delivery networks such as UberEATS, Grubhub, DoorDash and many others.
“Salaries in Silicon Valley tend to be higher so customers have more disposable income,” Goyal said. “The design elements of Loop is what initially attracts customers, but what keeps them coming back is the variety of products we offer. For example, we have kombucha and aloe beverages. We have different types of waters, all kinds of energy drinks, coffee drinks and craft sodas. We have a full spectrum that appeals to this younger generation so whether you want a traditional soda or kombucha, you can get it.”
Fortunately for Loop, these higher-income customers feel comfortable at a convenience store. The goal is keeping them happy and getting them to come back more than once a day.
“We are in an area where Gen Y and Gen Z grew up shopping at c-stores and craving immediate consumption items,” Goyal said. “These age groups snack more often than they have meals, so we cater to this emerging trend.”
Statistics show that Gen Y and Gen Z snack or eat six times a day. That’s six opportunities a day for new sales.
The Loop Back loyalty program and Loop Neighborhood mobile app play into this strategy. The loyalty program is points-based allowing customers to earn coupons that can be redeemed for in-store purchases and fuel sales. Loop partnered with Electrum on the loyalty program and developed the mobile app in-house.
Loop Back also features a club program open only to Loop loyalty customers. For example, the chain recently offered two Sunny Delight beverages for $2.50. It was a popular promotion that had supplier support, but only Loop Back members could take advantage. It’s these types of promotions that helped Loop Back grow to an impressive 179,000 members.
Proud History
The Goyal family traces its retail roots back to 1978 when Goyal’s dad, Nick, opened his first store and formed Vintners Distributors. Nick purchased an ARCO station while working for Bechtel Corp. as an engineer who designed cooling systems for nuclear power plants.
Nick Goyal put family members to work and the one store quickly became three. By 1981, he decided to leave his job as an engineer and jump full time into the gas station business.
“We started with ARCO, but in the mid-80s we transitioned to Shell. We grew as a lessee-dealer and also did stints as a contract operator,” Goyal said. “In 1995, my father decided that he wanted to buy dirt and build his own station. He did it mainly to secure his retirement. His initial plan was to build two or three only because none of us were ever supposed to come into the business. But then he got the bug. He loved it. He enjoyed buying dirt and developing properties.”
Over the next 12 years, what was supposed to be two or three stores turned out to be about 30.
Then in 2007, Vintners stopped developing gas stations because it was witnessing the trend of oil companies getting out of the retail business. “We wanted to save our capital to purchase those assets when they became available,” Goyal said. “In 2008, we purchased 47 sites from Shell. That’s also when we became a jobber for the first time, though we only had two customers.”
In 2010, Vintners formed the AU Energy joint venture with Shell and had the opportunity to purchase Shell’s 74 Bay Area sites pushing its store count to 125. That deal also allowed the company to become a wholesaler for the Bay Area.
Despite outstanding family leadership, Goyal was quick to deflect the chain’s success to the company’s 1,500 employees.
“Our success is purely due to our wonderful colleagues that work in the stores. They are hard-working, dedicated individuals who want to make people happy every day,” he said. “They enjoy their work and really want to build relationships. Community is important to us and in order to be a good member of the community we have to know who lives there and we must relate to them.”
After 40 years in the industry, Goyal said his family is extremely excited about the future.
“It’s a great opportunity to work in a family business. The management team is always available, decisions are made quickly and ideas can be implemented and tested faster than most large companies,” he said. “This allows for some really fulfilling work to be done for the betterment of the industry, our employees, our customers and the communities we serve every day.”
Loop at a glance
Loop is the product of AU Energy, a joint venture between family-owned Vintners Distributors and Shell Oil Co. The first Loop store opened in June 2013. Since then, the brand has expanded to more than 30 stores throughout Northern California.
Headquarters: Fremont, Calif.
?Store Count: 130 total including 30 Loop sites owned by AU Energy and 100 unbranded stores owned by Vintners Distributors. There are three new Loop stores under construction.
Employees: 1,500
Foodservice Brands: Loop Café, Fresh Grill
Fuel Brands: Shell and Chevron
?Wholesale Operations: Distributes to 60-plus dealer sites between San Jose and Los Angeles