1. 1 State of the Convenience Store Industry – Lottery Focus

2. C-store State of the Industry – Lottery Survey Retailer Concerns Labor  Sell time and redemption time  Store employee sales training Control  Track inventory (major control issue)  Store theft of lottery scratch tickets/lotto affect profits Marketing  No category management strategy for the lottery category analyzing the impact of lottery customer buying habits, loyalty or value  Promotions by retailers are limited due to perception of increased customer traffic Support from State Lottery Commissions  Low commission percentage  Online lotteries are a concern to convenience store owners 2 Retailer concerns represent opportunities

3. Does your company see growth potential for lottery? YES People continue to look for new games Sales have continued to increase with the installation of the new vending machines Opportunity to manage inventory better, more like other categories NO Competition from other lottery or gambling Store size This is not an area we typically look to grow due to the low margin % and unpredictability of jackpots 3

4. Findings Survey respondents represent a cross-section of chain sizes and geographies. What they have in common is an interest in seeing their lottery business prosper but a woeful lack of understanding about their current lottery business and ongoing training for their sales associates. Opportunity Provide retailers the data they need to fully understand, appreciate, and leverage the lottery customer’s impact on their business. In addition, due to employee turnover rates, an ongoing program of training is required. 4 Retailers Need Information

5. Where is instant lottery situated in your stores? What is your single biggest issues with lottery products today? 5

6. Findings Most retailers offer lottery the way they have for a long time, at the counter. The viewpoint that lottery is mainly a “control” issue and not a sales driver is still prevalent as is the perception that lottery tickets are labor- intensive. However, their own responses indicate the labor involved is not that onerous. Opportunity Emphasize the sales driving potential of lottery without ignoring lottery inventory and sales management issues. Address those issues with the latest information and training. 6 Perceptions Die Hard

7. Do you know how much total business loyal lottery customers are worth to your stores? How do you measure lottery performance in your stores? 7 11.1%

8. Findings Most respondents have experienced growth in lottery sales and expect future growth. The vast majority, however, cannot measure their lottery customers’ impact on their total business. However, these respondents are eager to learn and they are receptive to new ideas to expand lottery’s appeal in their stores. Opportunity Work with key accounts to research and develop key metrics for lottery that link lottery sales and marketing performance to total store sales and gross profit performance. 8 Room to Grow

9. How does lottery measure up to other categories? How do the lotteries measure up to other suppliers? 9

10. Findings The perception that lottery is a “necessary evil” with control issues and unworthy of category management resources persists. While at the same time, most retailers expressed satisfaction with the level of vendor (i.e., State Lottery Commission) support they receive. Opportunity Seize the opportunity to elevate the lottery/retailer relationship beyond the level of satisfactory supplier to preferred partner by providing operational excellence, actionable information, and ongoing training. 10 Contrary Perspectives

11. Preferred partners have a “place at the table” i.e. influence Recommendations Aspire to Preferred Partner Status Develop a category management approach to lottery performance  Information  Training  Services Identify c-store accounts by willingness to partner  Work with these “thought leaders” to employ proven strategies and tactics to grow lottery sales  Focus not just on lottery sales growth but total stores growth by driving ancillary sales in the key related categories Create a “tool kit”  One size does not fit all, but principles and practices are almost always applicable  Tailor to retailer size, resources, needs, and potential accordingly 11

12. Wrap Up / Q & A 12 Casey McKenzie Impact 21 Group cmckenzie@impact21group.com