All right. Good morning. It's great to see some both familiar and new faces in the crowd. We got a busy day today. As you know, I'm Brian Johnson, Senior Vice President of investor relations and Business Development. Before we begin, I'd like to remind you that this presentation contains statements that may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including those related to expectations for future periods, possible or assumed future results of operations, financial conditions, liquidity, and related sources or needs, business and/or integration strategies, plans and synergies, supply chain, growth opportunities, and performance at our stores.
There are a number of known and unknown risks, uncertainties, and other factors that may cause our actual results to differ materially from any results expressed or implied by these forward-looking statements, including but not limited to, the execution of our strategic plan, the integration and financial performance of acquired stores, wholesale fuel, inventory and ingredient costs, distribution challenges and disruptions, the impact and duration of the conflict in Ukraine or other geopolitical disruptions, as well as other risks, uncertainties and factors which are described in the company's most recent annual report on Form 10-K and on Form 10-Q, as filed with the Securities and Exchange Commission, and are also available on our website.
Any forward-looking statements contained in the presentation represent our current view as of the date of this presentation with respect to future events, and Casey's disclaims any intention or obligation to update or revise any forward-looking statements in the presentation, whether a result of new information, future events, or otherwise. A reconciliation of non-GAAP to GAAP financial measures referred to in this presentation are included in an appendix at the end of the presentation and can also be found with the rest of the presentation on our website at www.caseys.com under the Investor Relations link. All right. With that being said, today we have our talent on display to talk about our three-year strategic plan. We will start with Darren Rebelez to talk about Casey's, the convenience store industry, and our strategy. Next, we will have Steve Bramlage discuss the financials.
Following Steve will be Carrie Stojack, who will discuss guest insights, followed by Tom Brennan and Brad Haga, discuss how we accelerate food. We will take a short break, and then Kendra Meyer and myself will speak to growing units. Following that will be Ena Williams and Jay Soupene to discuss how we plan to enhance operational efficiency. Ena will then lead a moderated panel with Doug Means, Sanjeev Satturu, Nathaniel Doddridge, and Chris Boling, to discuss how we set the enabling foundation. Chad Frazell will then discuss the team member value proposition, followed by closing remarks by Darren. After our presentation, we'll take a short break for lunch and wrap up with Q&A. We are very excited with what we have to share with you today, With that, Darren will kick it off and give you a brief refresher on Casey's. Darren?
All right, thanks, Brian, good morning to everyone in the audience and on the webcast. My name is Darren Rebelez. I'm President and CEO of Casey's, on behalf of our entire organization, I want to welcome you to our Investor Day. We're extremely excited to share with you our vision for the next three years here at Casey's, to let you hear it from the team members that are going to make it happen. To first understand our strategy, you really need to understand who Casey's is. Casey's is a $10 billion enterprise value company that operates convenience stores in 16 Midwestern states. We recently surpassed the 2,500 store milestone, solidifying us as the third-largest convenience store chain in the U.S.
We're also unique within the convenience store industry, as we hold the fourth-most liquor licenses of any U.S. retailer, and we're the fifth-largest pizza chain in America. Our pizza program, specifically, is one of our many differentiators in the convenience space. We also have a strong rural footprint, as roughly 50% of our stores were opened in towns of 5,000 people or less. As I just mentioned, we have a famous prepared foods program. Casey's allows our guests to enjoy our food throughout the day, starting in the morning day part with our iconic breakfast pizza or breakfast burritos, pizza by the slice for guests grabbing lunch on the go, or a whole pie and chicken wings to feed the family during the evening day part.
We're a leader in our industry with a best-in-class rewards and technology platform, unlocking a better guest experience, ultimately resulting in better store level results. We're vertically integrated, self-distributing both fuel and merchandise inside our stores. That gives us positive control of our supply chain, which is a strategic advantage in the rural areas in which we operate. All of this is supported by our scale, which allows us to control costs while maintaining the value proposition for our guests and expanding margins for ourselves. We'll dive deeper into each of these areas later in the presentation, but when you consider our unique advantages, Casey's really is in a category of one. We have a long history of success that since our first store opening in Boone, Iowa, in 1968.
The Casey's brand is strong and recognizable, as we're top of the mind for many in our footprint. Within that footprint, as a rural operator, we play a pivotal role in the communities we serve, and we give back. Over the past three years alone, Casey's, with the help of our supplier partners and generous guests, has enabled nearly $15 million in donations back into our communities. This includes 267 Cash for Classrooms grants to schools, over 60 student scholarships, support of seven hundred and seventy-... services needed by veterans, and over 30 million meals provided through our Feeding America partnership. We've continued to grow the Casey's brand and footprint, and we've added over 900 stores in the past 10 years.
Now, while we have a history of success, we're also a contemporary retailer with over 6.5 million Rewards members, many of those using the Casey's app or e-commerce platforms to earn rewards, reward points for great food, fuel, or to give back to our community schools. Now, although we've been in convenience for 50 years, we continue to evolve as a modern convenience store operator, which frankly, is becoming table stakes to succeed in this industry today. Now, one of the universal truths about the convenience store industry is that it is resilient. It can perform through tough economic times, both good times and in bad. Now, the industry's resilience doesn't mean that all the participants are able to keep up.
The industry is shifting from primarily selling fuel and tobacco to prioritizing freshly prepared foods and investing in technology to meet the ever-changing needs of the consumer. Due to this shifting environment, the long-standing fragmented convenience store industry is consolidating, as those who are unable or unwilling to evolve and invest are consolidating into those who are. This is all underpinned by scale, becoming a bigger competitive advantage than it ever has been before. You can see over the past 20 years, the convenience store industry's ability to navigate in any environment. While the store count has remained relatively consistent and gallons have been in slow decline, there is not a notable, noticeable decline in inside sales, either during the Great Recession or the onset of the COVID-19 pandemic, which really shows the industry's resilience in any environment.
In fact, inside sales have been increasing over the past 20 years. While the industry's been resilient, Casey's has been thriving. You can see Casey's has been able to grow its store base, gallons, and especially inside sales over the past 20 years. We've been able to grow the store base as unit growth is at nearly a 4% CAGR over the past 10 years. Gallons have shown great growth, too, with a 10-year CAGR of nearly 6%. Our inside sales growth has been the most pronounced, with a 10-year CAGR of over 9%. All of this shows Casey's proven long-term track record of success. The operational success has shown up in the financial results as well.
Over the past 10 years, our 16% diluted EPS CAGR, 16% net income CAGR, and nearly 12% EBITDA CAGR has generated significant value for shareholders. This has only accelerated over the past three years as we made a conscious choice to accelerate growth as part of our previous strategic plan. As you can see on this pie chart, the industry is highly fragmented. In fact, over 60% of the convenience stores in the U.S. are owned by those that operate 10 stores or fewer. However, as you can see on the store count chart, nearly 70% of all convenience stores are owned by those that operate 50 stores or fewer. That represents 100,000 convenience stores. While these small operators are losing share, they still make up the vast majority of convenience stores.
This provides an opportunity for larger operators, such as Casey's, to acquire. There's ample room to continue this consolidation, as Casey's is the third-largest convenience store chain in the U.S., but has less than 2% of the convenience stores. That's exactly what we're doing, as we acquired 259 stores over the past three years alone. This dynamic supports our ambition to drive new unit growth via both new store construction and acquisition, and we've proven we can execute on that strategy. As these small deal acquisitions, as Brian will discuss earlier or later in the presentation, are in Casey's DNA. Contributing to the decline of the smaller operators are industry dynamics that are widening the gap between them and those with scale.
The small format kiosk stores that are over-reliant on fuel and tobacco are struggling to keep up as tobacco is a declining category and fuel demand has stagnated. Rising cost pressures due to inflation and labor shortages have squeezed operating margins and even forced operators to work in these stores to cover shifts. These challenges all work in our favor as our prepared foods, omnichannel capabilities, and merchandise mix make us less susceptible to these changing industry dynamics. We're not reliant on fuel to drive traffic to our stores, as approximately 75% of our transactions do not even include a fuel purchase. As we noted, fuel demand is changing as fuel efficiency, CAFE standards, and driving behaviors have all played a role. We're also actively monitoring electric vehicles, although there's very limited penetration in our geography.
We're actively engaged with the states in our footprint for funding, and we have 29 stores with 138 chargers supporting EV charging, and we rely on outside funding for these sites at the present time. We're also of value to our guests, with both our expanding private label program, which has 120 SKUs that are unique to Casey's, and our prepared food, where a family of four can enjoy a large pizza and two sides for much cheaper than a fast casual or QSR alternative. Our data-driven insights are telling us that our guests agree, as 80% of our guests think that we are a good value for the money.
We're capable to continue to capitalize on the changing industry dynamics, as our strong balance sheet and low debt position allow us to both absorb headwinds and also be an opportunistic acquirer. We're able to keep our store base fresh, as over 75% of our stores have been built, acquired, replaced, or remodeled since fiscal year 2010. Another way that the industry has evolved is making a larger investment in food and technology. Casey's has a robust rewards platform, with our users' 90-day active rate outpacing other similar reward programs. In addition, as we mentioned before, we have a best-in-class food program with our pizza.
As compared to our acquired stores, we add 750 basis points to the Prepared Food & Dispensed Beverage mix of inside sales, which thereby reduces the tobacco mix of inside sales by 450 basis points. Casey's investment in food and technology led to a more favorable inside mix, driving higher profit margin rates. All of this has helped make Casey's a convenience store industry leader that's gaining market share. As you can see, over the past three years, Casey's has consistently taken market share in the industry. The shifting dynamics in the industry have allowed Casey's existing strengths to become even more pronounced, our investment in food and technology has allowed us to take more and more share, via our existing stores working harder and by growing via acquisition and new store builds.
This is enhanced by our self-distribution network, which allows our shelves to remain stocked when others are relying on a third party. This is especially impactful in our more rural locations. Our stores are supplied out of three distribution centers that cover our footprint, with ample wide space within our footprint and within our distribution network to continue to flex our scale and to grow. The smaller operators are struggling with higher overhead costs and fewer levers to pull to absorb those costs. Convenience stores today are more expensive to run. Product inflation is pressuring margins for the smaller operators, but our centralized procurement team has the scale, leverage, and relationships to jointly plan and achieve savings at scale. Stores are more expensive to invest in, with EMV compliance, extended permitting timelines, and rising building and maintenance costs.
Guests today are expecting a bigger, cleaner store. Smaller operators just have trouble making the necessary investments to keep pace. Our scale and multiple revenue streams allow us to make the capital investments that are creative to the business. Wages and benefits increased 14% from 2021 to 2022, and over 70% of transactions are now paid with a card, and those cards come with transaction and credit card fees. With these rising costs, our store operations team, as well as functions within the store support center, allow us to leverage our infrastructure to manage operating expenses and to continue to grow our business efficiently.
Casey's also offers a tremendous value proposition to our guests in a convenient way, with a digital capability that allows our guests to be aware of our offerings and promotions, earn points for transacting, and giving guests a reason to come back over and over again. This is something that smaller operators simply don't have the scale to invest in. Everything we've discussed so far illustrates that Casey's is truly in a category of one. We're resilient, with an 8.7% inside sales CAGR from 2008 to 2010 during the Great Recession, and an 8.1% inside sales CAGR from 2020 to 2022 during the COVID-19 pandemic. We thrive in a fragmented and consolidating industry, as evidenced by the 259 acquired units from 2021 to 2023.
The industry itself is shifting. Tobacco demand is declining, and Casey's tobacco mix is lower than the industry's. Operators that are heavily reliant on tobacco are struggling to keep up with the reduced demand associated with that category. The sophisticated players in the space are making higher investments in food and technology, while the smaller players are having difficulty implementing any kind of prepared food program with the size, the cost, the scale, and other constraints. As the fifth largest pizza chain in the U.S., with over 6.5 million rewards members, we are where others are striving to be, and we're making the investments to ensure we remain a food leader in the convenience space. With our scale and proven track record of success, we have total confidence in our ability to execute our three-year strategic plan.
As I look forward to the next three years, I want to start by looking at what we accomplished over the prior three years. Something that's very important to me and the company and our leadership team is when we say we're going to do something, we come through on that commitment, and that's exactly what we did over the past three years. As a reminder, we said we are going to grow our EBITDA on pace with a top quintile of S&P 500 and the S&P 400 retailers, which was 8%-10% at the time. We intended to accomplish that by reinventing the guest experience, creating capacity to invest through driving efficiencies, accelerating unit growth, all while investing in our talent. We delivered on those objectives. We reinvented the guest experience in a number of ways.
On our 2020 Investor Day, we announced the launch of our Casey's Rewards program. Today, we boast having over 6.5 million members and a best-in-class engagement rate. We leaned into private label, where we went from selling primarily bottled water and some bagged candy at the beginning of the plan, to a private label program that has over 300 SKUs and makes up nearly 10% of the units and gross profit dollars in the grocery and general merchandise category. Now, to make room for all this product, as well as to more effectively fill the stores, we re-merchandised all of our stores, raising the gondola height and putting the right products in the right place in the stores. This resulted in accelerated same-store sales growth throughout the pandemic.
We created capacity through efficiency by standing up a number of new functions, including centralized procurement and asset protection. We opened our third distribution center in Joplin, Missouri, eliminating 3.3 million annual miles driven. That was a move that saved costs for Casey's but also had a positive impact on the environment. I think our unit growth acceleration speaks for itself, as the dedicated M&A team we stood up helped lead our most acquisitive year in the company's history in fiscal year 2022, while adding 354 total units, both built and acquired over the three-year period. This was all made possible by investing in our talent, as our diverse and strong leadership team has created a culture of learning and continuous improvement that's culminated in guest satisfaction scores increasing as we exited fiscal 2023.
This hasn't just been recognized internally, as we've received numerous awards over the past few years. These awards range from operational excellence to diverse leadership across industry and national organizations. I'm extremely proud of our team, our leadership, and every team member, as we've shown we are a great place to work, with a diverse leadership team that has quality and innovative products. These accomplishments are showing up in the financial results as well. Whatever way you want to slice it, we've had phenomenal results over the past three years. Our share price is up 45% from our 2020 Investor Day. We've seen outstanding growth in earnings per share and EBITDA over the period. We added over 350 stores while improving returns on capital, all while generating $1.2 billion in free cash flow.
The drivers of that growth have been well-rounded. We've seen excellent growth inside the store, where we've averaged 5.7% inside same-store sales growth over the past three years. Especially impressive has been our private label program, which, like I said before, has over 300 SKUs and made up nearly 10% of the unit sales and gross profit dollars in the grocery and general merchandise category in 2023. Our centralized fuel pricing and procurement teams have been a great success story, with our contracted gallons increasing to approximately 75%, all while growing fuel gross profit dollars at a 20% CAGR over the last three years. Our rewards platform has also experienced outstanding growth, as we now sit at over 6.5 million members, with an active member rate well above industry averages.
Now, our results over the last three years have been an acceleration of the long-term success of the company. In fact, we've outperformed the S&P 500 over the past 10 years. Now, with a long-standing track record of performance, Casey's has built a strong foundation with momentum to drive strategic value for the next three years and beyond. Now that you know the history of where we've been, how we fit in the convenience store industry, and our proven track record for success, I'm excited to share our new three-year strategic plan. We plan on delivering top quintile EBITDA growth of 8%-10% again. Now, that's a core tenet of the plan and what Steve will discuss shortly.
We'll walk through how our unique guest insights, a strong enabling foundation, and an excellent team member value proposition will help support our growth drivers, which are first and foremost, accelerating our prepared foods business while growing the number of stores and continuing to focus on enhancing operational efficiency throughout our organization. We're excited to show off our talent, as we have a robust group here to speak with you today on each of these tenets. With that, I'd like to introduce Steve Bramlage, our CFO, to discuss how we plan on achieving 8%-10% EBITDA growth. Steve?
Thanks, Darren, good morning. Today I'm gonna talk about our financial expectations and the goals that we have for the next three years, and try to provide some context around why we feel so good about our prospects of achieving those over the next couple of years. First, we'll take a look at the actual performance quantitatively versus the Investor Day 2020 goals that Darren gave you the overview on. Second, we're gonna highlight Casey's success financially over a long period of time where we run our unique play in our specific geographies. Darren laid out why we feel that that play still provides us a really long runway into the future, especially in conjunction with the new capabilities and the tools that we've invested in and developed over the last couple of years.
Third, we'll talk about the strong balance sheet, and the flexibility that that provides us and the opportunity we have to continue to support growth because of it. Fourth, we'll obviously dive into the next three years' financial outlook specifically, and I'll talk a little bit at a high level, how does the growth algorithm actually work, the way we think about it. We'll wrap up by talking about capital allocation, coupled with our expectations of returns when we invest shareholder capital. With that, let's take a look at the recent report card first. As Darren mentioned earlier, we set out on the three-year strategic plan in January of 2020, and obviously, a couple of weeks later, the world changed.
Despite that small, unforeseen matter of the COVID-19 pandemic, the company was able not only to manage but to thrive, we're pretty happy with the results. EBITDA grew at a 14% CAGR, that exceeded the ambitious and the top quintile goal of 8%-10% growth. Half of that EBITDA growth was generated by over 350 new units that we added over the last three years. The existing stores also worked harder for us, 'cause inside same-store sales growth was nearly 6%. Gallon growth was a little bit below our target, that's primarily a function of changing traffic habits during and after the pandemic. We did experience some inside margin contraction, and that's primarily a function of what's turned out to be generationally high inflation, caused in part by COVID-19 and the aftermath.
At the pump, as you all know, we saw significant margin expansion. CPGs ended up growing over $0.13 a gallon versus the pre-pandemic results. Despite acquiring over 200 stores in fiscal 2022, over the three-year plan, we were still able to grow total OpEx at a slower pace than EBITDA and generate well over $1 billion in excess free cash flow. We, as a company, are proud of these results. We feel like we delivered on that three-year plan, and that the say-do ratio Darren talked about earlier was pretty high. The play clearly worked, and it has been working, and that segues pretty nicely to the reality of it's been working for a long period of time.
Everyone from Casey's here today is a steward of the company, its assets, and its culture that were passed down to us by the people who preceded us. Part of that legacy that we inherited is a long track record of successful growth. We all feel good about the fact that the last three years were not only a continuation, but they were an acceleration of Casey's consistent long-term performance. For the past 20 years, we've seen double-digit EBITDA CAGRs and mid-teens EPS CAGRs, it has only accelerated when you start to look at it from a 10-year, most recently, a three-year horizon. The company made a commitment to accelerate growth and to deliver top quintile results, we feel like the success in delivering those commitments is pretty easy to see. Casey's has done all of this while growing inside same-store sales for 22 consecutive years.
Inside sales, especially prepared food, as we call our program, it's long been a differentiator in the convenience store space, and that's because it's really hard to do, and it's really hard to do well. We've been able to leverage that growth with pizza as the foundation for the past two decades. We've been able to sustain that strong growth while also returning cash to shareholders as we've increased the dividend 24 consecutive years. If I had to describe this page in a single word, I would use the word credibility. We believe the history and the performance in the long, in the medium, and the short term lends a strong degree of credibility to what we're trying to do in the next couple of years.
The company has always been conservative with the balance sheet to ensure that it provides the financial flexibility that we need to support growth opportunities. As we enter the next three years, we feel like we're sitting in an extremely favorable financial position. Our leverage ratio, which for here is calculated in accordance with our senior notes, it's a touch below our long-term target at 1.8x. We have ample liquidity of one and a quarter billion dollars after we recently refinanced our credit facility. Even in a higher interest rate environment, we have a weighted average cost of debt that's below 4%, and only about 15% of the debt that we do have is exposed to rising interest rates. We have a strong cash position, which gives us further flexibility to invest in strategically compelling EBITDA and ROIC accretive opportunities.
We've got the ability in our notes to lever up to 3.5x debt to EBITDA, and we have an acquisition holiday that can get us to 4 x. The reality is there's not a lot of potential deals in the industry of that size, but for the right opportunity, we would be willing to step up the leverage temporarily with a firm commitment to quickly work it back down to that long-term goal of 2 x. I think the three transactions that we had in FY 2022 and the associated debt paydown that we had are pretty good real-life example of how that works. As you can see to the chart on the right, we don't have any substantial near-term debt maturities that are gonna be a strain on cash or expose us in any unfavorable way to market dynamics along the way.
With a long track record of strong financial performance and a balance sheet that can support our strategy, we feel confident in the next three years that we can continue to deliver top quintile performance in our industry. Top quintile right now is 8%-10% EBITDA growth. The play that we've been running has been successful. We feel like it has more runway associated with it, and we believe we can succeed as we keep delivering those strong results. That 8%-10% CAGR, it's ambitious. As I said, it's top quintile, and it's completely consistent with the company's historical results. For transparency, we define top quintile as the forward-looking view over the next three years for the S&P 500 and the S&P 400 composite retail peers that have a market cap of greater than $5 billion.
We add in our public convenience store peers and have a few exceptions to that. As you all know, this is not a quarterly CAGR expectation. May not always be a four consecutive quarterly CAGR expectation either, given the volatility of fuel on our results, but we feel strongly over the next three years, we can deliver this. We're going to accomplish this by leaning into what we already do well. We plan, we're going to grow the store base by over 350 units. That'd be a CAGR of over 4%, for easier math, over that period of time, and that'll be a mix of organic growth and acquisition, as it has been. With this growth commitment, it will be fulfilled, and it can be fulfilled with small store or single deals.
That is the existing playbook that we've been running, but we do have the financial and the operational flexibility to transact on a larger acquisition if it's a strategic fit, if the price is right. We're going to plan on growing inside same store sales at a mid-single digit pace, while expanding inside margin. The reality is we're likely to have less of a price tailwind in the next three years than we've had in the past three, but we also anticipate lower levels of cost inflation as well, to be fair.
The growth inside the store won't come at an increased or an outsized increase to operating expense, as OpEx is planned to grow at a slower rate than EBITDA, just as it has over the past three years, as we're going to pursue a myriad of store simplification initiatives that you're going to hear about shortly. We all know how volatile and challenging to model all things fuel can be. To be clear for this algorithm, we're trying to be as pragmatic in this regard as we can be. We can deliver the EBITDA growth with flat same-store gallon growth and with fuel margin that averages in the mid-30s. We're optimistic that market dynamics, post the pandemic disruption, and our own capabilities will lead us to outperform on those metrics, and we remain highly confident we're going to outperform in our specific geographies.
This is what it takes to make the math work. We plan to do all of this while generating over one and a quarter billion dollars in free cash flow. What is an easy way to think about how does this 8%-10% algorithm work? It's really simple. It's two-pronged. About half of the growth comes from the existing business, the mothership, as we would call it, and the other half from new unit growth. In fact, actually, over the last three years, this is exactly how we split the growth that the company experienced. Over the next three years, we expect to run a very similar play, and throughout the remainder of the presentation, you're going to hear from the leaders, our leaders in food and operations and store growth to lay out specifics around that plan.
Overall, we feel like we have a great foundation entering this next couple of years to accomplish the goal, and we're going to allocate the capital that we generate in a way that drives value for shareholders. Clearly, one of our most important jobs as management is to prudently invest shareholder capital, and so the first priority in doing so for us is to reinvest into growth via new store construction and/or M&A. Because the maintenance requirements of our business are quite low, over 75% of our PP&E spend has been and will continue to be growth-oriented, and that's going to be directed to adding new units that can be EBITDA and ROIC accretive. Secondly, we do have a long track record of returning cash to shareholders, as I mentioned earlier, with that 24 consecutive years of dividend increases. We're proud of this fact.
Our long-term philosophy on the dividend is twofold: to maintain a 15%-20% payout ratio and to increase dividends consistent in the midterm with EBITDA growth. We will continue to tend to the dividend in this regard, consistent with those two principles. Third, we do target a steady state leverage ratio, as I mentioned earlier, of 2 x debt to EBITDA, with that ability to lever up if there's a large transaction that makes sense. Given that the current leverage is a touch below 2 x, you shouldn't expect us to aggressively de-lever from these levels. Finally, we also have a $400 million share repurchase authorization, and you should expect us to be a little more opportunistic in using it over the next few years than we have been recently.
I'd like to walk quickly through our return expectations when we invest shareholder funds. The WACC is currently 7.5-8%. For the 2023 fiscal year, we had an 11.8% ROIC. Darren highlighted earlier how that stepped up 130 basis points versus the beginning of the past three-year strategic plan. I'd remind most of you what you already know, our return expectations for a new unit are identical, whether we build it or whether we buy it. We expect double-digit after-tax returns by the second or the third year, and mid-teens returns on invested capital at the unit level by years five or six. Mature markets tend to be on the earlier end of that range.
New markets are on the later end, and it's really a function of how quickly the prepared food business ramps up, and that's a function of how familiar people are with the pizza that we offer in that market. Final point I'd make here is that, our long-term incentive plans are fully aligned with all of this. They're around EBITDA growth, improving ROIC, and then we have TSR as a performance metric as well. The key takeaways we'd like you to have as it relates to the financials for the next couple, or the next three years, excuse me. First, we'll continue to deliver against the top quintile EBITDA growth, and that's 8%-10%.
Second, we are confident in our ability to execute on the goal because we have a consistent and a credible track record of doing just that over a really long period of time. Third, the balance sheet puts us into a really good position to be able to support that strategy, and we have ample liquidity to be opportunistic for potential acquisitions and remain nimble to continue to invest behind building new units. Fourth, the balanced algorithm that we have, it's proven to be successful with this two-pronged approach. We can generate, and we will generate EBITDA from both, again, the mothership and from new and acquired stores. Finally, all of this is done with a capital allocation strategy that prioritizes driving EBITDA and ROIC growth and accretion. In conclusion, we love the hand that we're holding.
We've got a proven strategy to ratably grow the business, and we have the flexibility to capitalize on larger opportunities if and when they become available. I, for one, am really excited about the next three years at Casey's. This is very much a self-help kind of a strategy, and I feel we largely control our own destiny. For the rest of the presentation, our talented leaders are going to explain exactly how we're going to try to make all this stuff a reality. Now it is my distinct pleasure to turn it over to Carrie Stojak, who's our Vice President of Guest Insights. Carrie?
Steve. Thank you, Steve. Good morning, everyone. I'm Carrie Stojack, Casey's VP of Insights and Food Innovation. I'm excited to be here at Casey's because this brand believes that the secret to growth is to keep the guest in front and center of everything we do. In fact, much of our success over the past few years is rooted in our ability to understand and predict our guests' changing needs. Our insights provide impact across the organization, including marketing, guest-facing technology, store development, private label, Operational Excellence, and of course, our craveable food. Over the past few years, we have developed a proprietary insight process that allows us to listen and observe guests in real time to see what's happening in their rapidly changing lives. At the center of this is finding a strong growth opportunity.
We have a really excellent business intelligence team that partners with insights to help find those big opportunities. Once we have an opportunity identified and sized, the idea is fed through our pipeline innovation process. We apply a design thinking approach to find a wide variety of solutions that are profitable, feasible, and desired by guests. We test through these ideas with guests to find the best solution. We don't stop there. We want to make sure that what we do also helps build our brand. We look for that cultural top spin or that deep human truth that makes the idea really resonate with our guests and in the world they live in. This is not easy, but it's worth it because that's when things get really fun and compelling.
Let me show you an example of how we use that process to bring a recent product to life. Starting with the business opportunity, we knew that we needed to drive breakfast traffic in the fall when our guests are going back to work and school. This is when guests build breakfast habits, so there's a significant upside to making sure that we capture them early in the season. We begin ideating around an attention-getting promotion to remind guests to stop at Casey's in the morning. It turns out that Casey's pizza, breakfast pizza, was actually turning 21 at the same time. It was the perfect time to celebrate and remind our guests of the equity in breakfast pizza. At that time, we also learned that beer cheese is a trending ingredient.
We decided to use that to build brand, catch attention, and give a hint to breakfast pizza's coming of age. Now, we have a strong business case, we have a delicious product, and we have a brand-building reason to launch. What's that cultural angle that really makes the product drive an emotional connection and relevance with our guests? Well, you ask Busch Light to make the beer cheese. Busch Light is a huge part of Midwest culture. In fact, Casey's sells more Busch Light than any other convenience store retailer in the U.S., and Busch Light makes up 20% of our beer sales. The results of this pizza launch was outstanding. With the launch of only in digital channels, the Ultimate Beer Cheese Breakfast Pizza significantly drove breakfast sales.
The product was also a huge hit in social, with a 29% engagement and 80 million media impressions. Who is the Casey's guest? Around 50% of our stores are in towns of 5,000 or fewer. We have a very hardworking base of guests with much lower unemployment than in urban areas. Many are skilled blue-collar, earning good wages. In fact, only 28% of our guests make less than $50,000 a year. Our stores are in states that rank 22nd or lower in cost of living. As an example, an average house, a good house, actually, in Iowa is $204,000. When you think small town, sometimes people think that means a slow-paced life. In fact, our guests live very active lives.
Spring and summer are full of lake life, festivals, local town events, and local sports. Fall is all about hunting, Friday night lights, school events, family gatherings. There's always something going on. There's tons of opportunity to be the brand that gets them what they need in their busy lives. Our guests are also extremely loyal, and they'll often visit Casey's for a variety of occasions throughout the day. We often have the same guests come in in the morning and get a breakfast drink and breakfast and an energy drink, and then stop by later again on the way home. In fact, because we're in so many small towns, it's easy to hit multiple Casey's during a typical commute.
Not only are we able to get them what they need when they're out and about, we're also there for them when they get home. Having a fully established pizza business allows us to satisfy that at-home dinner occasion that none of our C-store competitors can. Casey's also earns high marks in guest satisfaction, with the strongest attribute being friendliness. I mean, friendliness, that's I think that's amazing giving the labor challenges people have today. Okay, let's talk about how the guests view us. What do the guest wants? We're very dialed in to what the guests want, and we are uniquely positioned, we think, to satisfy those needs. No shocker here, the most important thing to guests is convenience. Our guests love that we're always working on taking the convenience to the next level, though.
Order ahead in the app, delivery pizza and beer. The sheer number of locations make us a quick and easy stop. Now, our curbside service earns extremely high satisfaction scores. Just imagine February in Nebraska, and you don't have to get out of your car to get your pizza. I mean, that's convenience. Importantly, our guests demand high-quality, cravable food, and that is so hard to find in most C-stores. This is where Casey's really differentiates because we have high standards of taste and quality, and all new products must earn super high scores with our guests before we launch. The right assortment is also critical. Guests want to be confident that the items that they want will always be available.
That means we need to have all the favorites and everyday items, but it also means we must constantly be looking for new and exciting items that guests want today. Value is important to all guests today, really. Casey's does extremely well here. We reliably outscore competitors as being a brand that offers a good value for the money. We have lots of chances to prove value to our guests through a steady stream of rewards offers, our private brand value, as well as everyday promotions offered online and in store. It's also important to understand how the guest views Casey's. Casey's has incredibly high brand awareness. I mean, most brands would love to have a 92% top of mind awareness. Not only do we have strong awareness, but guests are also very familiar with Casey's.
This means that in most markets, we don't have to spend marketing dollar to build brand. They know us. Instead, we can focus marketing spend on driving traffic. Not only are we well known and established, but also much loved. We have been part of communities for over 50 years, and that creates a very deep emotional connection with guests. Although even though Casey's has been around for 50 years, the brand has positive momentum. Guests see Casey's as a brand on the way up and has a lot going for it. This is based on years of Casey's trying new things and breaking convention. Our guests look forward to what's next because it's part of Casey's brand DNA. I mean, if you think pizza from a gas station, breakfast pizza and beer delivery, exciting LTOs, loyalty games, exclusive private label, fun digital engagement.
I mean, it just goes on and on and on. Keeping the guest center in all we do will remain a key part of our strategy. We are set up well to listen, understand, and react in real time. We have the tools and processes in place to accelerate more growth through new opportunities. Our guests are asking us to deliver on convenience, high quality, cravable food across night and day, and unwavering value during these challenging times. Our pizza is our crown jewel, and we will continue to deliver and innovate in that area to delight the guest and keep Casey's relevant. We are blessed to have a strong brand that continues to be seen as innovative and relevant. I wish I could tell you all what's in the pipeline, just know there's exciting things to come.
I'd like to turn it over to Tom and Brad to discuss how we're going to accelerate food. Tom?
Thanks, Carrie. Good morning. I'm Tom Brennan, the Chief Merchandising Officer at Casey's. I have the pleasure of introducing the next portion of our presentation, where we will talk about accelerating food at Casey's and why that is at the center of our three-year strategic plan. Very shortly, I will hand it over to Brad Haga, our Senior Vice President of Prepared Foods and Dispensed Beverages, for him to walk you through the details of those food acceleration plans. I will then be back after we highlight our latest creative, to talk about how we will support those efforts through our omni-channel marketing approach in the further leveraging of our Casey's Rewards platform. Brad?
All right. Thank you, Tom.
Thanks to everyone for joining Team Casey's today. As Tom mentioned, my name is Brad Haga. I've met many of you over the past few years, probably talking a lot about more of our grocery and general merch side of the business. I have recently taken on the lead role in our dispensed beverage and prepared food business unit, and I'm super excited about the opportunity. Today, we're gonna start with grocery. As many of you know, we've had a tremendous amount of success over the past few years, driving both top and bottom lines with grocery and general merchandise. Our initial priority three years ago was to get our assets and space allocation right across to enable us to scale programs.
Back in October of 2020, we reset over 2,000 stores in just 45 days with new extended gondola, enabling space for 200 additional SKUs, many of which are private brands today. We reset stores where big, growing categories were provided more space. We also reset category locations with more appropriate adjacencies. For instance, making sure packaged bakery is close to coffee across the store base. Next up, was getting the products, the right products into our stores. Our approach with grocery was to strive for differentiation, much like Casey's Pizza. We have differentiated on many fronts and had partnered with many great suppliers like Pepsi, to bring exclusive products to market, like Casey's own Mountain Dew Overdrive, which quickly arose to being a top-selling SKU in our beverage assortment.
We also partnered with our friends at Sazerac to bring forward a Buffalo Trace Single Barrel Select program that is only available at Casey's. There's way more to come on this front. Finally, our real differentiator, private brands. We now have over 300 SKUs and 10% share penetration on units and dollars. We have many products in the back of the room for you to try today. Please enjoy yourselves. With regards to the assortment, exclusive and private brands are only part of the battle. Our merchants are constantly looking at national brand innovation and remaining market data to determine which of our existing portfolio can be replaced by higher potential products. This is a never-ending process that ensures driving a more productive assortment year-over-year.
Lastly, we have been extremely focused on making sure our results are sustained through improvement of our business process and internal systems. Our key focus, build synergistic partnerships with key suppliers to ensure when we win, our partners win. We call this joint business planning. This is really the lifeblood of our grocery business and a foundation. Over the past three years, we have built a track record of doing exactly what we say we're gonna do. If we commit to a program, we will make sure that it gets executed across our system and will drive results for our shareholders and partner suppliers. All right, now on to food. Let's talk. Our prepared food business sits on a strong foundation. When you look back over the past year, there's a lot to be proud of.
As Carrie mentioned, we have stood up a product development stage gate process that is rooted in design thinking, ensuring that we are focused on the guest and building scalable solutions that deliver incremental growth to our business. That development process has driven some very successful LTOs. BBQ Brisket Pizza was so successful that we left it on the menu permanently. Carrie already told you about our beer cheese pizza. I'll talk a little more later about that, also our King's Hawaiian BBQ Brisket Sandwich, a phenomenal offering. We've also leveraged our new Casey's Fit process to bring to market our newly launched Casey's thin crust pizza. More to come there. As well as our pizza revamp program, which leveraged guest feedback to optimize our recipes and pizza builds, and deliver higher quality pizza to the guest.
Removing kitchen complexity for stores and delivering more profit to the bottom line. Our pizza revamp is a win-win-win. As Tom noted a couple of slides back, a critical piece of our next three-year business plan is to accelerate food. We think about that work in three distinct verticals. The first, is blocking and tackling and running the business. Manage the product assortment, manage price and promotion, manage where things go in the stores. Second, building a new muscle and new capability. Fortunately for us, we have a track record of success here. We make pizza from scratch in our stores. Third, Tom will come back a little later and talk about how we optimize the guest experience and drive breakthrough awareness of our key initiatives via omni-channel marketing. First, we start with the basics. You start with building out roles and intents for each category.
The categories that are big and growing, and where our guest gives us permission to own a large segment, they get more of our time and attention. Pizza is a great example of this. It will remain the center of our plate going forward. We must look at how we assort and price our stores. Our stores are becoming more and more diverse, serving a broader and broader set of guests, serving much different needs from store to store, and operating in really different competitive environments. Our point of view is that all stores should not carry the same assortment, pricing, and promotional plans. Those with significant competitive pressure should promote and price more aggressively than those without. Higher volume stores, with the volume and infrastructure to support, should carry and produce a broader assortment.
Also related to assortment, as we now span 16 states, a more regionalized assortment becomes more important. A portion of what we offer must flex based on local needs. Lastly, as I mentioned earlier, we've had a lot of success on the grocery side, cultivating key relationships with CPG partners to build plans that are mutually beneficial to all parties. Over the past few years, Casey's has continually outperformed our remaining market competition. Based on our successful track record, our CPG partners continue to bring more and more resources and exclusives to Casey's, and we greatly appreciate their support and partnership. Going forward, we're gonna take the same approach to joint business planning in the world of prepared foods and dispensed beverages. All right, we talked blocking and tackling. Now let's get into the new exciting stuff.
To enable Casey's to do more in the future with food, we must start with simplifying and streamlining what is asked of our kitchens. This starts with understanding what tasks need to get done in stores, and those tasks that don't add value. If there is something that can be done upstream from a store that optimizes quality and cost, we will evaluate and work to remove that task from a store. Things that are true differentiators that a guest values, like making original Casey's pizza crust from scratch every day, we will keep doing in stores to differentiate Casey's. A little later, Ena and Jay will talk more about how we work to further streamline our kitchens. Let's talk about new platforms and sales layers. We are data-driven and a data-driven organization.
There's a lot of data that suggests we have some big opportunities to develop new sales layers that really complement our core pizza business. Some of those include apps, sides, shareable desserts. We will also put a major focus against optimizing our dispensed beverage business. We will strive to be Casey's good in all of these areas. At the end of the day, whatever we do, we must work to prove out the incrementality of our efforts before scaling. That we know. All right, now let's talk some innovation. Our product development process is helping us move faster and more thoughtfully with innovation. When you add that our org structure more closely connects our insights team, our culinary experts, and our brand managers on 1 team, we have a recipe for future growth.
Two years back, we made a full court press at optimizing the A.M. day part. It had great success. Our focus now turns to lunch. In a recent partnership with King's Hawaiian two months back, we launched our King's Hawaiian Barbecue Brisket Sandwich. That product is helping drive double-digit unit % growth for the P.M. hot sandwich category. Amazing! That's just the start for lunch. As we look forward over the next year, we'll be bringing a lot more exciting lunch ideas to market. We look forward to sharing those with you. Last but certainly not least, the crown jewel, pizza. As mentioned earlier, this past year, we had tremendous success with the launch of BBQ Brisket Pizza and Ultimate Beer Cheese Breakfast Pizza. We're not just gonna settle there.
This past week, we just launched our first major piece of crust innovation with our new thin crust option that was developed using our original crust formula, ingredient formulation. Got to tell you, it's amazing. We'll figure out how to make it for you guys at some point down the road. Now the good news is, you can have any of your Casey's favorite pizzas made with our new thin crust option or with our handmade original crust. The choice is up to you. In summary, regardless of whether it's continuing to drive crust innovation with our established pizza business, optimizing our fryer program to deliver higher quality product across a much broader assortment, or to premiumize our dispense beverage business through made-to-order beverages, we see a lot of white space for the business going forward.
Thank you for your time today, before I turn it back to Tom to chat about omnichannel, let's take a quick look at our latest TV spot supporting our exciting thin crust launch.
Not coming out until Casey's has thin crust. One thin crust?
You have no idea how much this means to my son. Hey, bud, Casey's finally has thin crust.
Party cut with a touch of sea salt.
He's finally coming down.
Casey's did it, Dad!
Thin crusters, the wait is over. Casey's new light and crispy thin crust is here.
All right, as excited as I am to be able to share our latest creative with you, as Casey's ushers in our thin crust era this summer, even more exciting is our new external partnerships and internal process enhancements that will ensure we are able to continually produce the most compelling creative materials to support how we will accelerate our food business and the brand overall. Early this calendar year, we transitioned to our new creative agency of record, the Tombras team out of Knoxville, Tennessee. With that move, we took a fresh look at how we bring marketing ideas to life. Foundational to this is a sound creative brief process, where identifying fundamental truths, intentions, allows us to speak to the heart of what moves our guests and potential guests.
As we build out these great ideas, we are committed to threading their communication seamlessly across all facets of our guest experience, across all channels, every time. Of course, while we certainly intend to sell a lot of pizza through these efforts, we know that the best measure of relevancy with our guests is how often they are swinging the door and visiting our locations on a daily basis. That is why everything that we execute from an omni-channel marketing perspective is centered on driving traffic across our footprint. I also want to highlight a new tool in the toolkit for us at Casey's, as we continue our evolution to omni-channel experiences. Casey's Access, which we first announced in December of last year, represents a new digital initiative that will create opportunities for brands to leverage our scale and capabilities.
It is about delivering relevant, timely, and personalized media moments that will allow for the cultivation of connections that make a measurable impact. As the U.S.'s third-largest convenience store chain and fifth-largest pizza chain, we can leverage over 6 billion data points from transactions in our stores and interactions online across an addressable audience of 45 million. An audience that is highly engaged in our stores and is deeply loyal to the Casey's brand. Casey's Access will allow partners to elevate their brand's impact across our unique inventory, on-site, off-site, and on-premise at our stores. This is all backed by robust campaign reporting, in-depth audience and creative analysis, closed-loop 1-to-1 measurement, and incrementality studies to ensure that the desired results meet the actual results. One of the most profound vehicles we have to maximize on our marketing efforts is our Casey's Rewards program.
I can recall being here 3 and a half years ago, where we were talking about the launch of Casey's Rewards and all of the promise that entailed at the time. I stand before you today with an award-winning program that is over 6 and a half million members strong and growing, and one of recently refreshed capabilities and enhancements. More than a third of Casey's transactions now come from our loyalty members. Members who visit more often and, on average, spend more per trip than non-members. We also boast a highly active loyalty membership, about half of whom shop with us at least monthly using Casey's Rewards. By any measure, that is industry-leading, and with last month's refresh, we look to maintain and expand upon these advantages.
By making it easier for our guests to earn rewards points, utilize the app to choose and redeem those rewards, and offer shareable referral codes to allow members to earn even more points while we expand the program, you can see the virtuous cycle in action. We have also added a lifetime savings tracker so that our guests can see how much they have saved over the course of their relationship with us. All of these elements come together to drive relevancy for Casey's and results for our shareholders. I could not be more enthusiastic about how we are positioned heading into our next three-year plan. Immediately following a short break, you will hear from Brian and Kendra, who will talk about how we are going to grow the store base over the next three years.
Thank you, and please feel free to grab some of our amazing private brand items for a snack, and we'll be right back after the break.
We're gonna get started here. Welcome back from the break. It's nice to be back up on stage again, discussing with all of you our strategic plans to grow the business over the next three years. I've been with the company for over 20 years now in a variety of roles, and while most of you guys know me as the IR contact, I actually spend as much of my time, if not more, on M&A. Unit growth has been a critical part of our strategy now for many years. This section will highlight how we intend to continue on with that successful track record, whether it's taking advantage of opportunistic acquisitions or optimizing a network plan with the new stores. Casey's will continue to reinvest capital in the business, which will be a key part of maintaining that top quintile EBITDA growth.
Before we get into our strategy, I want to take a moment to review what has made us so successful over the years. Casey's has sustained predictable, ratable growth for a long time and has a well-invested network of stores. Since 2010, the company has built or acquired close to 1,200 stores and has replaced or remodeled over 700 stores. Our differentiated business model, with capabilities such as self-distribution and our best-in-class food offering, enables us to successfully operate stores in both rural and suburban markets. You can also see by this slide that we have accelerated unit growth these last three years, moving up from a 4.2% 10-year CAGR from fiscal 2010 to fiscal 2020, to a 5.1% three-year CAGR from fiscal 2020 to fiscal 2023.
The increased activity was driven by M&A, where the company acquired 259 stores these last three years, and you can compare that to 309 acquisitions for the previous 10 years, prior to fiscal 2021. Our past three-year performance demonstrates the effectiveness of our two-pronged approach to growth with both new store construction and M&A. In addition to growing the business by at least 345 units, in our last Idea Event, we committed to creating a dedicated M&A team in order to increase outreach to smaller operators. We also committed to implementing predictive analytics and to target mid-size markets. We delivered on all those commitments. The makeup of the new unit composition was different than planned. Back in 2020, acquisitions were much more expensive and harder to come by.
As a result, we expected to lean in more to new store construction rather than overpay or overreach for acquisitions. The world changed a few months later, and the newly created M&A team paid for itself quickly. Demand shock via work-from-home mandates and government shutdowns put severe pressure on the industry, particularly the smaller operators, and became a major catalyst for consolidation. There were also complications with the new store construction side. We saw planning and zoning meetings get delayed or canceled. Department of Transportations are still working through a backlog of ingress and egress approvals. The beauty of our approach to growth is that it can thrive in any economic environment.
We have built as many as 85 stores in a single year in recent history, but can also pivot to acquire 200+ stores in a year, like we did in FY22. This flexibility allows us to be selective on acquisitions and enables us to deliver predictable growth at attractive returns. Darren mentioned earlier that two-thirds of the industry is made up of stores that are operated by individuals that own 10 stores or less. There's a misconception out there that higher fuel margins are enabling record earnings for everyone in our industry. While that is true for the larger chains, the smaller operators are still struggling. Break-even fuel margins have climbed significantly due to higher labor and maintenance costs, as well as rising credit card fees. They are also likely experiencing volume loss both inside and outside of the store.
Many of these operators lack the scale to ward off merchandise cost increases and have experienced inside profit margin pressure. I have reviewed countless acquisitions that have showed meaningful fuel margin increases year-over-year, only to have the EBITDA trend the other direction due to these pressures. Feedback we have received from both investment bankers, brokering deals, along with independent operators, is that scale means more now than it ever has before. While the smaller transactions may not always grab the headlines, in our opinion, they're an excellent way to drive shareholder value. Many of these operators are over-indexed to tobacco as a percentage of their inside sales. They typically do not have a meaningful prepared food program offering, nor do they have the capital to improve their stores for kitchen installations or general maintenance.
Oftentimes, these smaller operators are selling branded fuel, which is more expensive from a fuel procurement standpoint. Finally, it's very difficult for smaller operators to have any sort of digital guest engagement, loyalty program, or any meaningful private label program. Our centralized support and self-distribution is an immediate synergy we bring to these acquisitions. We are able to quickly place these stores onto our national accounts for fuel and merchandise and deliver the goods with our own fleet of trucks. Our private label products are a strong value proposition to our guests and are also margin accretive. Our pizza program is our most significant synergy, which is usually in place within 9-12 months from the time the deal closes. This is an incremental category for the stores we acquire.
Frankly, the most difficult thing for us to manage is our guests' expectations when they hear we're coming to town. They often show up to the store the first day we take it over, hoping the pizza's on site. Obviously, this is a high-class problem to have to deal with. The value accretion for these deals is pretty straightforward. We generally purchase these stores in a range of six to 9 x trailing 12-month EBITDA. Given we usually get a few turns of value from the synergies we put into place, these deals become very compelling, given where we typically trade as a multiple of our own EBITDA. This slide highlights some of the additional financial metrics of our small deal M&A performance.
We mentioned already how we're thinking about deals on a trailing EBITDA standpoint, we also evaluate stores based on potential replacement cost value and, of course, from a return on invested capital perspective. The left side of the slide shows how typical acquired stores compares to an investment in a newly constructed store. We typically spend around $1 million in CapEx to refurbish an acquired store, take care of any deferred maintenance from the seller, update petroleum equipment and other equipment in the store, and finally, install our kitchens, which is either through an interior remodel or an exterior bump out. Despite that additional cost, our all-in investment, including purchase price, is typically a half a million to $1 million below replacement cost.
In addition to being a cheaper way to enter a market, we are not diluting the demand by adding another store in these rural towns. The middle section of the slide highlights the financial improvements we typically experience. Fuel gallons rise 7%, while also being pulled into our favorable procurement contracts. Inside sales lift 20%, driven primarily by our high-margin prepared food category, we enjoy a 70% lift in EBITDA as a result of all the synergies previously discussed. Returns are typically in the mid to high teens when they hit maturity, 3 to 5 years after change of control. These returns are also in line with newly constructed stores, which is why we are comfortable toggling between the two strategies.
While our bread and butter may be the smaller transactions, we're still ready to take advantage of opportunistic larger deals when they become available. We still have the ability to bring synergies, even though they tend to be more sophisticated operators. The Buchanan Energy transaction was a great example of this. Their stores were already high volume and very well run. Their merchandising was decent, and they were well-maintained units. We were still able to integrate our prepared food program in the majority of the stores, thus significantly expanding the offering and expanding inside gross profit margin by over 850 basis points. We're ahead of schedule on the synergies captured and in kitchens in about half the stores we acquired. If you recall, these stores on average, were almost double the fuel volume of our existing stores.
Buchanan Energy did a great job with site selection, and by adding our food service, private label, and self-distribution capabilities, paired with our scale, we have a premium group of stores that are in great corners and good markets. There are many operators of this size in our existing and adjacent markets that would be a great fit for our business. Given the strength of our balance sheet and our ability to be flexible on our capital spend, there's little financial constraint to completing more deals just like this. I'm now gonna turn the presentation over to Kendra Meyer, our Vice President of Real Estate, to discuss our organic store growth strategies. Kendra?
Thank you, Brian. I'm happy to be here today. I'm excited to speak about our organic growth opportunities. When we seek new locations, we have a robust set of tools to ensure that we leverage data and invest in the right locations. Our overall strategic network plan utilizes a market attractiveness scale in conjunction with predictive analytics and other data sets to mitigate risk and drive performance of new locations. Our market attractiveness scale is built on four key pillars: historical performance with stores within the area, the competitive landscape, market economics, and regulatory matters. Utilizing this data allows us to target growth in specific areas, accelerating dense brand presence for optimal awareness. In addition to market attractiveness, we leverage predictive analytics to optimally build out a market.
We validate premier locations based on site-specific sales expectations and can then determine the best approach to entry, acquisition, or an organic build, avoiding oversaturation of a market. We're continuously evolving by adding loyalty data to our analysis and frequently updating internal models to capture site-specific margin expectations, costs, and return. With our investment in robust analytics and modeling, in addition to evolving our offerings both inside the store and expanding our fuel offer, new store performance continues to outpace historical builds. As you can see on this chart, we have seen significant improvement in all top-line categories. On average, year 1 fuel gallons have increased nearly 65%, grocery and general merchandise over 50%, and prepared food and dispensed beverage sales continue to climb, averaging above 20% growth in recent build classes.
We continue to see organic builds hit double-digit returns within one to three years of a new store opening. The metrics shown also exclude major truck stop locations, which would only be accretive to this output. As we look at our distribution radius, which is shown here as the optimal driving distance, not only do we have ample room for growth, but we can also support our strong growth strategy for the next three years and beyond without modifying our current distribution strategy. Additionally, one misconception that investors may have is that we are oversaturated in the Midwest. However, approximately 75% of the towns with a population between 500 to 20,000 within our distribution radius do not currently have a Casey's. Although we're built on rural routes, we've successfully integrated into suburban areas, allowing for even more growth opportunities.
We've expanded our store formats to increase market penetration and meet guest needs in areas we may not be able to serve otherwise. Recognizing that Casey's can successfully penetrate into various types of markets, we have a variety of prototypes that allow us to choose the right asset for the trade area, maximizing our return on investment. We're known for serving rural communities. In these towns, we have become the destination restaurant, grocer, and fuel provider. Our smallest prototype is designed to continue growing in rural areas with a cost of nearly half of our standard store cost. At 3,200 sq ft, we have our typical offerings, including our made-from-scratch pizza, but we have a reduced sales floor and fewer restrooms. A recent example of our smaller format store is in Flippin, Arkansas, which is a town of approximately 1,300 people....
Both fuel and inside sales are already in line with our company average, and the store is still ramping. Our standard prototype is generally deployed in more suburban areas, offering more sales floor space, additional cooler and freezer space, and more restrooms than our smaller format. For interstate and major highway locations, where we offer a separate diesel island for trucks, we have our largest prototype. We have found that the commercial guest that doesn't necessarily like going to the full-service locations will choose our store because we still offer showers, laundry, interior seating, well-lit overnight parking spaces, and of course, our delicious pizza. With multiple prototypes, we're well-positioned to optimally deploy capital and expand our footprint. We've had steady growth throughout the years, and our last three years created strong momentum.
We're going to continue to accelerate growth with a plan to add 350 new locations in the next three years. We have the robust data to determine where Casey's should be, the ample space to grow, the capacity to do it, and the ability to serve all trade areas with the optimal offer and best return on investment. Brian and I have just told you how we plan to grow the store base, now Ena and Jay are going to tell you how we plan to operate stores even more efficiently. Yes.
Good morning. I'm Ena Williams, Chief Operating Officer. Today on stage with me is Jay Soupene, our Senior Vice President of Operational Excellence. Over the next 15 minutes, we'll walk you through our strategy to enhance operational efficiency. I want all of you to understand that we are taking aggressive steps to make our stores more efficient and easy to run. Our goal, as you will see, is not only to lower operating costs, but to improve the guest and team member experience. I view this as a critical part of enabling growth. Our strategy targets one central challenge. Historically, our store operations were too complex. Our processes, tools, and technologies were not streamlined or very efficient. Last year, we set out to change that. We're already seeing progress. Today, leaders in our new centralized store support center are Lean certified.
They bring a disciplined, data-driven approach to improve operations and hit financial targets. As a result, we are now measuring almost everything that happens in our stores so that we can understand where we can improve. As you'll see, we're taking extra time and unnecessary steps out of every single process. As we look back at fiscal year 23, the results are clear: we have achieved significant efficiencies and labor savings. The strategy is working. Even better, this is just the beginning on what we're planning to achieve. I'll walk you through our four pillars of operational efficiency. For each, I'll cover where we were, how we've improved, and what we're planning next. You see the four pillars here: store simplification, streamlining the kitchen, speed of service, and inventory optimization. All of these work streams are supported by two foundational capabilities: store modernization and our culture of continuous improvement.
I am certain that all of this will enable us to do more with less, helping us achieve top quintile EBITDA growth in the coming years. Let's turn to our plans for store simplification. The four ideas you see here didn't start at store support center. Two years ago, we gathered feedback from stores through surveys and interviews. We also established a store manager advisory board representing the stores across our footprint. We asked what their biggest challenges were and how we could help them be more successful. The feedback was clear: managers had too many tasks that took them away from the guest. There were too many steps in each process. They didn't have the latest tools and technologies. Operations were not designed for efficiency. This was the starting point for our strategy. We decided to take the voice of the stores seriously.
Since then, we have created major initiatives that directly address these top challenges and making stores easier to operate and grow. We started by eliminating the complexity. That required streamlining every process, removing any steps that don't add value. We're also equipping managers and team members with the right tools and support to make running the stores easier. We started streamlining communications. Previously, managers had to juggle many different channels and many different types of communication. When the busy weekend hit, they struggled to keep up with everything we sent them. We're evolving two-way communication that is centralized and monitored by a gatekeeping team. They make sure managers get the right communications at the right time and nothing else. The feedback from our team members has been terrific. The final step in store simplification required modernizing labor management. Managers had to rely on their own rough estimates.
We have a centralized, Lean approach to forecast how many team members they need at any given time. This helps us deploy our team in the most efficient way, meet guest expectations, and drive profitability. Let's turn to our kitchen. You may not realize it, but as we grow food revenue, running a hyper-efficient kitchen really matters. The kitchens are already incredibly busy. Our stores can see pizza orders double on Friday and Saturday nights. We've begun to implement a Lean approach in the kitchen. Team members will now work in the kitchen with the right equipment, technologies, and supplies, all intentionally laid out to be at the right places to drive efficiency. It cuts down time on preparing and delivering every order, and that time really adds up. I'll give you an example.
Over the past year, we rolled out an advanced label maker that automatically prints a UPC code for easy checkout. It's a simple fix, but it will replace a slow, outdated system that required multiple labels or even handwritten notes. Over the next three years, we will continue to evolve basic processes and automation to support modern forecasting and production planning. This will enable us to meet guest preferences and drive efficiency, quality, and scalability. For our guests, it comes down to service as well. In our stores, the best way we know how to enhance the guest experience is to make it faster. This starts with the single biggest demand on team members' time, and that's checking out the guest. Currently, more than a quarter of all store labor is spent on getting the guest out the door.
As a result, we're testing a model for self-checkout. Consumers have grown used to this option, and based on our learnings, our goal is to integrate it across more stores in the future. We're also shifting to new asset protection software that will monitor team member performance and the potential for cash losses. Right now, we are in testing stage, and we expect to begin phasing it in this fiscal year. Additionally, our AI-enabled voice ordering system makes it easy to place an order, no matter the call volume. Until recently, far too many people were calling in an order, only to find the call dropped or never picked up. On busy nights, this new system can significantly reduce missed orders. We are currently testing this capability in over 100 stores to determine future rollout plans.
We're optimizing our inventory, store layouts, and processes. Here's how we're doing this. We are improving our merchandise hierarchy and visibility to category and item-level information. That means using the intelligence of a more advanced forecasting tool for every store. Eventually, we will evolve to a process that simplifies store ordering as well as supply chain management. We're also improving how we lay out our spaces and inventory, putting the right products in the right places. This makes it easier for our kitchens to serve more fresh food while reducing waste. These changes make running the store easier. I'll give you another example. Previously, teams ordered their kitchen items using the alphabetical checklist. Sounds right. Everything's in alphabetical order. However, it wasn't the best for the team. Now, we've reorganized the checklist based on where the items are located.
This reduces the number of steps and time it takes to place an order. It's really simple, but when scaled across all of our stores, it means significant efficiency gains. I'll hand it over to Jay for him to give you several perspectives that make it clear why we are confident in our operational efficiency strategy.
Thanks, Ena. I want to emphasize something that Ena said. For our operating model, almost all the tasks we execute in our stores are engineered. We lead a rigorous process for maintaining these labor standards as we add new products, services, and efficiencies to the model. To put it in a financial perspective, last year, we integrated a continuous improvement capability. We implemented more cost-effective processes and services, whether it was smart safes, third-party laundry, new kitchen tools, or a myriad of minor changes. These all added up to real growth in profits through OpEx reductions. We reduced labor requirements, which contributed to an over 20% decrease in overtime and training hours in fiscal year 23. Our approach has not been to just cut labor, we've been intentional about how we build efficiency. We've made jobs easier by removing non-value tasks and adding new tools and processes.
In fact, our team members feel like they have even more time to better serve our guests. Our watchwords? Simple and easy. It's critical that our team members hear, see, and feel the changes to believe we are fully invested in supporting them. These changes boost team member engagement and directly improve the guest experience. Store simplification is just one of the key work streams that's led to a reduction in turnover, leading to even more labor savings. We're just getting started. We're well-postured over the strategic plan for more efficiencies. Modernization of our store systems is foundational for these efficiencies. Ena and I have already mentioned the integration of smart safes, as well as our approach to self-checkout. We know that a number of our current devices aren't scalable, present risk at single points of failure, and are just becoming outdated.
This impacts our sales, orders, and inventory management. It also makes it harder to deploy software upgrades. We will invest capital to replace this hardware and transfer key applications to a modern computer virtualized platform. Storage computing is the foundation for these improvements. Centralizing these capabilities reduces complexity and increases system availability. It allows for faster software deployments. This is really important as we continue our growth trajectory through acquisitions and new stores. Lastly, this change expands the lifetime of our equipment and facilitates the integration of new technology across our footprint. Thanks, Ena.
Thanks, Jay. We've discussed processes and systems, but in the end, it comes back to people and culture. We believe the best way of attracting and keeping people is to create a culture of continuous improvement. Building this culture takes time. We're off to a great start. Our leaders are fully engaged, we've unlocked value. We're poised for more success. As we approach store simplification, easy for you is our brand. It will be the lens we use to drive the business and support our stores effectively. What you see here on this slide is the way we are committed to operate on the left and the results we expect on the right. This is our template to grow as a learning culture through the next three years. I am very optimistic about what we can build to drive efficiencies and slow OpEx growth. Thank you.
Thank you, Jay. I now like to invite 4 of my colleagues for a deeper examination of our enabling foundation. All right, let's do a set change. Thanks. Thank you. All right. Hey, team.
Hey.
After spending most of this morning reviewing the three-year strategic plan, I want to transition to a discussion about the foundation needed to enable our three strategic pillars, and those pillars of store growth, accelerating food, and operating efficiently. On stage with me are four of our top leaders who will help bring an appreciation of Casey's scale, highlighting the importance of consistent execution that our guests expect and deserve. I also want all of you to understand that for these positions, we have exactly the right people in place, who have a track record, deep experience in the industry, and real knowledge of how our systems work. I thought we should hear from them directly because they can show you how these aspects all come together. On stage, we have Nathaniel Doddridge. He heads our fuel organization. Doug Means leads supply chain efficiency efforts.
Sanjeev Satturu leads Casey's information and technology teams, Chris Boling, on the end there, brings a lot to life in our stores as head of store operations. Let's begin with fuel. Nathaniel, you know, the growth of EVs is getting a lot of attention. It has been for a while, right? Can you give us an update on what we're seeing in our markets, and how are you adapting our offer to participate in this energy transition?
Yeah, you bet, Ina. A lot of attention's right. I'm not sure there's a day that goes by we don't hear something about electric vehicle growth across the industry. As we heard from Darren earlier, we've actually been quietly building out an EV portfolio ourselves. As we sit here today, we have 29 locations with chargers, 138 chargers at those locations. What we're seeing from a transaction base is about 4% of total transactions are from EV transactions.
Mm.
locally at those locations. You know, as we look at where we should go from here, one of the metrics we really focus on is EV registrations as a percent of total vehicle registrations. You know, in our footprint, that number is only about 0.6%, so a pretty small number for us. You know, despite that absolute slower number for growth, it's hard to deny we're seeing a lot of funds enter this space, a lot of capital enter this space, that's coming from both public and private funds. We've really taken a step back over the last year, evaluated the broader EV market, and feel like we have a really good plan to be able to grow at the right pace.
Mm-hmm.
at the right locations, and of course, make sure we're leveraging the third-party funds that are available.
Very good. EV penetration is small in our footprint, like you mentioned, so retail pricing is extremely important for your team, right? This has been an area of evolution for Casey. Now let's talk about COVID. How has post-COVID demand and increased cost volatility impacted our approach to retail pricing?
Yeah, of course. As you think back to when we originally made the decision we did on the retail fuel front.
Mm.
it really went back to two things. The first one being: how do we reduce the burden on the local stores? Which we talked a lot about that, you and Jay did just now on store simplification. The other big piece of that is really taking positive control of our retail fuel pricing. When you think about a post-COVID environment where the market volatility has been extremely high-
Yeah
... as you're looking to balance the new normal for demand, having that control locally for us and being able to maximize total fuel profitability, really underpins why we made that original decision. You know, one of the challenges we face on the retail front, and we face this whether it's pre-COVID, COVID, or post-COVID, is: What is, what's demand look like, and what should the new normal for demand look like post-COVID? That's a little bit of challenge on where that market share should be, but when we look at benchmarks like Opus, we feel like we've done a really good job of balancing our, our demand and getting our fair share of the market.
Our end game, whether that's the prior three years or going forward, is gonna be to maximize total fuel profitability. The investments we made in our team, in our systems, and our processes, we're really excited about those investments. The last thing I'll say is, all of this retail fuel success wouldn't be possible without other support functions from our store support center, and one of those is our fuel transportation business. Similar to Doug, we do run a proprietary transportation business for fuel. You know, that's just another example of how we leverage our scale. When you think about us going into a market-
Mm.
having critical mass to be able to put our own assets in those markets is extremely advantageous, and in those other markets, we leverage third-party fuel haulers. We'll continue to look for ways to invest in our proprietary fleet as we grow, because we know that's the most-
Mm-hmm.
advantageous for us from a fuel perspective.
Thanks, Doug. I appreciate that. Doug,
Yeah.
Nathaniel mentioned the importance of having a mix of third-party and proprietary fleet. For grocery, we're self-distributed. How is that a competitive advantage, and what are you doing to keep that going forward?
You know, we're really proud of the fact that I think we do distribution and transportation really, really well. You know, I not a surprise, we hear a lot about, you know, challenges with supply shortages. Certainly, everybody hears supply chain more today than they.
Mm-hmm.
-than they used to. Labor shortages, labor availability is another issue. You know, you know, the thing that I love about being self-distributed is, you know, we're not the, at the mercy of a third party that we've got to negotiate with when things change or, you know, that especially in a rural footprint, where costs for these guys can get really expensive delivering to some of the more remote stores. We're able to, I think, support that really well. We've got technology that we use to make sure that when there are supply shortages, we're getting products to the right place at the right time. Quite frankly, I think we do a great job of that.
Mm-hmm.
Beyond that, you know, our DCs are really in the right locations. You know, Kendra showed a map there with all of our store locations and sort of where that fit into our network. You know, we've greenfield modeled this and said, "You know, if we didn't have any DCs, where would we put them?" Interestingly enough, the DCs where they're actually located are almost in exact same spots as where a greenfield map would tell you you should put them. You know, we got it right, thank goodness, and it's working really well for us. You know, we added Joplin a couple of years ago. That took...
Darren mentioned this earlier as well, you know, that took about adding that 3rd DC took about 3 million miles out of the network when you think about how we would have supported those stores, from the 2 DCs.
Mm-hmm.
You know, really great results there. Finally, I think, and the thing that we're most proud of is we've got great people. You know, we've worked really hard at building an environment where our employees are engaged and excited about supporting the stores. They feel a part of the company, and they just do a fantastic job of making sure that our stores are taken care of.
Excellent. Let's talk a little bit about technology, Doug, in the DCs. You know, you know, simply adding technology is never sufficient. We know this. It starts with some process improvement first. How are you addressing process improvement before you can even layer on technology?
Yeah. Yep, you know, I got here about a year and a half ago, and I think one of the things that we noticed really early on is that we had the basic building blocks of doing this really well. We just hadn't extracted a lot of the value out of it. Just like Jay talked about with the stores, you know, we really built a culture of continuous improvement. Our people are the leaders of their business. They own it. We expect them to find ways to extract the most value out of every part of the operation. We're always looking for those continuous improvement opportunities, and quite frankly, there's a lot there. We've got the capacity that we're extracting, and I think we've got some runway there.
On top of that, you know, we do have technology that's in place, just wasn't being fully utilized. Our strategy over the last year and continuing forward is to take what we have and just get better at it.
Mm-hmm.
We're using technology in the DCs to extract more productivity. We're getting really great results, and we've seen some significant changes there as well.
Yeah. Thank you.
Finally. One other thing I wanted to add, too. Our procurement teams, our inventory management teams, you know, they have great relationships with our suppliers. These suppliers have good skill sets, innovation pipelines, some other things that we really haven't historically had a chance to take advantage of. So we're now using that, working with our suppliers to make sure that we're using the skills that they have to help us as well.
Thank you. Thanks, Doug. Sanjeev, you're our IT person up here, and everyone always points to having technology, and we need technology to be better. How are you going to achieve consistent and scalable technology to help us grow?
Good morning, Ena. Thank you. Good morning, everyone. We are taking a very disciplined, five-pronged approach with the scalable foundation. First, starts with what Ena talked about, fast service. We're gonna put edge computing in our stores. What that really means is trying to provide service to our guests where the action happens, which is in our store. In simpler terms, as Jay covered about edge computing, what it means is, we're going to put processing power so that it allows us the flexibility to run apps and software on team member devices to better serve our guests. Second, Ena touched the topic about streamlining.
We're going to take the same focus with the technology to streamline our technology run, and that will benefit us in efficiently and effectively running our whole technology stack. Third, we'll continue to drive our modernization to the cloud and the APIs. That'll allow us to integrate technology, new technology, faster and in a scalable fashion that will enable our growth agenda. Fourth, we'll continue to automate our security controls across the whole end-to-end technology management process. That will drive to deliver secure and safe Casey's technology. Finally, we'll continue to treat our data as an asset, and with proper governance and proper control. That will allow us to provide data accessible to our team members, and Brad kind of touched upon it. That will drive fact-based decisioning across all levels of our organization.
That's a lot, Sanjeev. How does it really help our guests and Casey's going forward?
Yes, you know, Darren talked about, you know, providing our guests. Our guests, when they come into the store, they'll look for a friction-free experience. You also hit upon that. Providing smart and convenient technology just does that for our guests, both online and offline. Above all, that provides in itself an undeniable value to us in the form of repeat business, loyal guests, and a strong community engagement. For our team members, that translates into keeping our stores clean, our shelves stocked, and providing great guest service. Also, it drives very efficient, productive workforce and help our team members to better manage their careers, run better store operations, and above all, as I said, a friction-free guest experience.
Thank you, Sanjeev. Chris, you're not off the hook down there. You've heard all three of these leaders give their insight on their plans and to support our three strategic pillars. How do their plans support you and your teams to execute at store level?
Thank you, Ena, good morning, everyone. Yeah, with 2,500 stores across 16 states, consistent execution is pretty important, so our guests get that positive experience in our stores. We spent a lot of time talking about how that happens this morning. Jay spent some time talking about how we're simplifying the work and making it easier for our team members. Nathaniel spent time talking about how we've centralized pricing, so our stores don't have to worry about that, and they can focus on delivering great store standards. Doug spent some time talking about how we manage inventory, how we keep our stores in stock and support our promotions. Sanjeev talking about leveraging technology to make the work easier and developing tools that provide data-driven insights.
A lot going on upstream, and then it's our job to bring it to life in the stores.
You know I'm gonna ask: How are you gonna bring it to life in the stores?
Yeah. From my perspective, it really comes down to three things, the first is the development of our field leaders. Over the last two years, we've made a significant investment in this. We provide many formal and informal training opportunities to help them grow their skill sets, this helps them make more informed and effective business decisions, depending on what the current conditions are. Secondly, is creating an environment where our stores' teams can be successful. You know, Jay talked about the continuous improvements. We have an entire department squared up around removing work from the stores that doesn't add value. You know, Brad and Carrie talked some about the innovation process with food.
That's just one example of processes we have in place, so when initiatives go to the stores, we make sure they're fully vetted.
Mm-hmm.
they can be executed, we have resources to support it. Things such as e-learnings through QR codes or video instructions or things like this, so our teams can execute at a high level. Finally, regarding execution, we wanna make sure we deliver on that intent, so we measure ourselves. We've put tools in place that provide data in a very actionable way. We have a communication platform and a task management tool that keeps our teams informed at an enterprise level around current initiatives, things that are in play, and things that are upcoming. It gives our field leaders a clear line of sight as to where we're executing well, where there's opportunities and gaps that we need to move against.
Yep. Awesome. I'm gonna go full circle, right? Let's go back to the strategic plan centered around growth, and I'm gonna ask each of you to quickly summarize how your planned actions will support the three-year strategic plan. Nathaniel, I'll start with you.
As we've alluded to the last few earnings calls, we began the process of moving farther back in the supply chain for fuel procurement. What does that mean? Today, as we buy fuel, we take ownership of that fuel when it leaves the fuel terminal and goes into our truck. By moving farther back in the supply chain, we're moving closer to the refinery gate to try to strip out some of that value. We will take ownership, you know, from the refinery into the pipeline, into the fuel terminal, and into the truck. We're beginning to stand up some of those capabilities, both organizationally and technically there at the office, now.
You know, we do feel that it's hard to argue with our strategy the last three years of enhancing our fuel procurement strategy. As we grow, as we move into more markets, more complex markets, we know that having this strategy is gonna be really, really important for us, having this capability. You know, it's a really important thing that we're focused on right now. I would fully expect you to ask me what's the value of doing this?
Nathaniel, what's the value of doing this?
Yeah. In a generic's response, I would say we don't do anything, I would say, as an organization, without creating value. We wanna make sure we meet all the hurdle rates for any business case we put together. There's gonna be lower cost of goods when we do this. The other thing I'll say is there's also a security supply element to it.
Mm-hmm.
Given the markets.
Yeah
That we operate, there's definitely some opportunity to maximize some supply arbitrages across markets.
Thanks, Nathaniel. Appreciate it. Doug, how about you?
Yeah, sure. You know, again, you know, we heard a lot about the, with the three-year plan, we're talking about acquisitions, talking about new stores, talking about food innovation and the changes associated with that. I'll go back to, I think, the value of being self-distributed.
Mm-hmm.
You know, we don't have to worry about change and what that means to a third party or, you know, somebody we have a contract with. We're very nimble. Our goal is to support change, support them quickly and make sure that whatever we need to do as an organization, our job is to make sure that we can execute on that. Second thing is, you know, we, it's a little bit of a buzzword, but we've seen great results out of this. We built, over the last few months, a digital twin for our distribution network.
... in testing, it's about 98.5% accurate, we get highly accurate digital representation of what our, it's a model that we can use to test and do what-if scenarios. We've got, I think, good technology that we can use to make sure that we're making the right decisions as we do make those changes. Third, we need to continue to extract capacity in our network. Like I said, we've got that capacity. We just really are in the process of making sure that we're unlocking it and staying ahead. Finally, we've got some technology coming in this upcoming fiscal year around inventory planning and demand planning, excuse me, and inventory management.
It's gonna allow us to make sure that we're putting product even more in the right place, and the right quantities, and extracting as much as we can out of the assets that we have. A lot coming, but it's all good.
All good. Sanjeev, your support.
Yes. You all heard about, a lot about technology, we'll continue to accelerate and continue the journey on our technology and continue to innovate while staying very focused on that 5-pronged approach I talked about in our discipline to execute. At the end of the day, it's making and providing a smart and convenient technology to our guests at the multi-touch points that Darren talked about, that's what will generate friction-free experience for our guests as well as our team members.
Thanks, Sanjeev. Chris, bring us home.
Yeah. Really, I'm just gonna go back to some of the things I spoke about. In the field, we're gonna be focused on three things, so it's developing our field team, so they approach the business as a business owner, that kind of a mindset, and they're focused on using data to drive performance. The next is creating an environment where they can be successful, and it's gonna be focused on leveraging technology to make the job simpler . Finally, is just measuring performance, how we're doing in execution. Using data and tools to make sure that the actions that we're taking are delivering financial value and delivering on that great guest experience.
Thank you, Chris. I wanna thank my colleagues for this. For the audience here, I hope you can see the level of expertise and experience we're bringing to support our three strategic pillars. Thanks, team. I appreciate it. With that, I'll turn it over to Chad to walk us through our team member value proposition. Thanks, folks. Appreciate it.
All right. Thanks, Nina. Thank you, team. Good morning. It is my pleasure today to introduce our team member value proposition. It's the foundation of Casey's strategy. Anything we accomplish, we do through our 43,000 plus team members. I joined Casey's just as the last three-year strategic plan was launched. Over the last three years, we've done some foundational work to position us to be more strategic. We've added capability like asset protection, procurement, continuous improvement, and data and analytics, in addition to several internal reorganizations to better position Casey's to win. We just finished our fourth year of record results. Our culture, employment branding, and new or enhanced development programs allow us to better attract, develop, and retain great talent.
As you may have seen in Darren's slides earlier, Casey's was recently certified as a great place to work, a certification administered by an independent third party, based largely on team member survey results. The way work gets done has evolved to be more collaborative, changing from a corporate office to the store support center. Casey's is a collective group of people working to serve our stores and ultimately our guests. We now have advisory boards where store managers, drivers, and service techs regularly provide us feedback on what we can do better. Finally, we value our team members. We introduced Casey's Cares values over two years ago, and we've seen consistent improvement in engagement scores in nearly all areas of the company. Now, as we look to the next three years, we can evolve to our first-ever team member value proposition. Our TMVP is made up of four components.
Each of them is equally important to the goal of meeting our team members' expectations. I will speak to each of the four and how we've already begun to leverage them on our path forward. The first is career growth. We know that if team members feel they have a bright future with Casey's, they're more likely to stay. One of the top drivers of engagement is how our team members rate us on the statement, "I have opportunities to learn and develop," on the annual engagement survey. As an example, we invested heavily in district manager development in fiscal 2023. Our over 220 district managers' engagement score improved from 86% in fiscal 2022 to 92% in fiscal 2023, a 7% improvement. We've also emphasized career pathing with a focus on our district managers.
In fiscal 2023, we had 8 DMs move to a new role in a different area of the company, a significant increase for Casey's. Team members want a combination of competitive pay and benefits at a place where they feel recognized. Significant base pay investments have been made in key positions to ensure we are competitive in the markets we serve. Recently added benefits, like our team member support fund, paid bonding leave for parents, and earned wage access or daily pay, are examples of how we will support team members' total well-being. As I mentioned earlier, we introduced our Casey's Cares values a couple years ago. We've incorporated values into our talent management-based activities, like onboarding, succession planning, and performance management. We recently cycled the one-year anniversary of our first DEI executive committee meeting.
The committee meets monthly. In just a year, we've added three additional business resource groups for team members to join and participate in networking, development, and volunteering activities. Team member engagement is much more than an annual survey and score. It's about communicating more effectively and simplifying the work our team members do in every area of the company. Reducing the amount of time our store team members spend on tasks and our store managers spend on administrative activities, not only increases productivity, it also allows them to spend more time with our guests and in our store. As Jay mentioned, continuous improvement efforts play a critical part in our team members' experience. The team member value proposition is our guide in setting our HR strategy and taking action for the next three years and beyond.
Casey's has over 43,000 team members, of which over 97% are in our stores working to serve our guests. Our team member value proposition must emphasize what they value. The Good Jobs Strategy by Zeynep Ton illustrates that companies with large numbers of frontline workers must understand that smooth operations and investing in team members leads to a better employment brand, improved retention, and development, which ultimately results in a better guest experience. We know through surveys, focus groups, and day-to-day conversation, what our team members value: flexibility, career development, health and well-being, compensation, and meaningful work. All of them tie directly to our team member value proposition. Our strategy is focused on the front line. In fiscal 2023, we reorganized the field HR team to have an HR generalist in every region.
This helps to reinforce our culture, and ultimately, we see the results in increased engagement and lower turnover. We'll invest in technology that gives our team members more options, like shift swapping and the ability to pick up shifts in more than one store. We're investing in the development of our leaders. We launched our district manager development program in fiscal 2023, a week-long session that upskills their business acumen and leadership. Two-thirds of the DMs have been through the program at our store support center, with the rest due to participate in early fall. In fiscal 2024, we're introducing a leadership development cohort program for our 200+ training store managers, who are responsible for training all their peers. We'll continue to add new or enhance our existing development programs for all levels throughout the organization. Job simplification is a priority, especially in our kitchen.
For example, we recently added new smallware so that pizza making is easier and faster while maintaining the quality. All of the work we've done using the team member value proposition as our guide, has led to reduced year-over-year turnover for nearly every operational position at Casey's, and a 3-point improvement in engagement year-over-year. In conclusion, I'm incredibly proud to be part of this talented and diverse leadership team. We've promoted team members who have demonstrated the ability to live our Cares values while delivering great results. We brought in other leaders with vast experience to either develop new capabilities or help us to be a better, more modern version of ourselves. I'm excited to see our people execute and deliver on our next three-year strategic plan. I'm going to turn it over to Darren now to wrap up.
All right, thanks, Chad, we hope you in the audience and those on the webcast have a greater understanding of who Casey's is and importantly why you should invest in Casey's. The convenience store industry is a resilient one, but it's one that's shifting into the areas that Casey's is already strong in, such as food and technology, scale matters more than ever. Casey's is differentiated from its convenience store peers for a number of reasons. You know, first, we have our rural footprint, approximately 50% of our stores are in towns of 5,000 or fewer, which is a real strategic advantage with limited competition. We have a restaurant quality food offering in our pizza program that's the fifth largest in pizza chain in the U.S.
We have the unique ability to sell spirits as we hold the fourth most liquor licenses of any retailer in the U.S. We have technology that enables the business to be effective while efficient, and a rewards program and an app that's best in class. We have a vertically integrated supply chain that enables the shelves to be stocked even in those rural communities. Finally, we have a consolidated scale that gives us better negotiating power with our vendors, more favorable fuel procurement in an industry where scale is becoming more important than ever before. We have a proven algorithm that has led us to be successful over the long term and has only recently accelerated. I want to thank everybody for listening to the presentation today.
For those of you in the room, please enjoy some lunch and some more of our private label products, and we'll regroup here in about 30 minutes for Q&A. Thanks.
All right, we're gonna start the Q&A. I'm gonna ask that the folks come on up to the stage, and I'll turn it over to Darren here to facilitate the Q&A. We got some mic runners coming up, too.
Mics are just happening.
All right.
Can you hear me? Am I turned on? Yeah, I'm turned on without this, so.
We're all turned on.
We're all live.
Oh, we're all on.
Yeah, I think so.
Yeah, we're live.
Oh. Wow, this is almost like a White House press conference. Bonnie, go ahead. Fire away.
I have that.
Yes.
All right, thanks. Thanks for the overview today. It was super helpful. I guess a key question for me is the 8%-10% EBITDA CAGR that you've outlined over the next three years. I guess what I'm trying to reconcile is, as I look at this fiscal year, you've kind of highlighted an expectation for more flattish EBITDA growth. It kind of puts a lot more of the growth in the out years. Could you touch on that and then maybe, you know, your conviction or confidence in your ability to hit that? Or maybe has something changed in this fiscal year that we should be aware of, where there might be upside?
I'll just start off by saying your math is correct.
Mm-hmm.
You've got that right. Steve, I'll let you, kind of walk through that piece of it.
Nothing has changed related to the current fiscal year, right. The experience or the outlook and the experience that we gave on the last earnings call. Really, the dynamic over this three-year period of time is simply the starting point. You know, I tried to make a comment that obviously when fuel moves around a lot in the short term, has a big influence on the numbers. The starting point of the three years happens to be a $0.40 CPG number. Just mechanically, to get that back to a mid-$0.30s number, if, and we're assuming essentially it all happens in the first year, right? You're gonna end up obviously with a little more weighting and a higher CAGR in the two out years to get the whole math to work.
We're comfortable that, you know, that 8%-10% of the modeling guidance that we gave for the year, 'cause we didn't really give an expectation for the fiscal year. If you get back to that mid-30 number in the first year, you're gonna have to have more than an 8%-10% CAGR on EBITDA in the second and third year. We're comfortable over this period of time that that makes sense to us.
Any more color on kind of the drivers in those out years, why you feel comfortable about, you know, your ability to get-
Bonnie, can you use...
Oh, yeah.
Sorry. You know, just any more details on, you know, your ability to kinda hit above that 8%-10% and what gives you the conviction? 'Cause, you know, everything you laid out, you know, I'm just trying to understand your ability to kinda hit, I guess it would be either low, maybe mid, you know, teen EBITDA.
Yeah, if you think of the rest of the business we're gonna have continued momentum inside the store, right? The inside the store progression from a mid-single digit inside sale numbers, that continues. The margin expansion over this period of time accelerates, right? If you just think of kind of what we're entering this first year with on some of the ongoing things that we're still dealing with some of the commodity inflation rolling through. Your margin expansion accelerates as you get out through there, and a lot of those store improvement initiatives on the operating expense side that Ena and the team walked through, right? Those accumulate over the period of this three-year period of time.
We get compounding benefit from the operating expense initiatives, would be the second, and then the third is just the new units, right? As new units come in, you know, you get accelerating EBITDA contribution over that period of time. I guess the piece I would remind you is, we're still getting synergies from the acquisitions that we had in the prior three years. Use Buchanan as an example, right? We don't have all the kitchens in those stores yet, right? Just because of permitting timelines, et cetera. You have some latent momentum that will continue to disproportionately benefit that second and third year throughout the entire business. It's just in the first year, when you get a big fuel CPG change, that gets washed out.
Yeah, I guess the only other color I'd add to that is what you saw with both Kendra and Brian talking about how those new units perform or the acquired units perform versus historically, the way they performed. The next 350 stores are going to look different from a performance standpoint than the prior 350 stores. That also kind of compounds the benefit over the next three years. Yeah.
Hi, Karen Short, Credit Suisse. I'm wondering actually if you could give a little bit more of the breakout that within your expectations on the grocery versus prepared food, and then within that comp expectation, how much is pricing or, and/or inflation? I had one or two other questions.
In terms of same-store sales-
Yes.
Margin or both?
Same-store sales.
Same-store sales would be comparable. We're assuming you know, mid-single digits, 4% or 5%, what that number ends up being. We would think it would be consistent between those two. I think I had mentioned that there's gonna be less inflation benefit going through the pricing, right? The reality is, in the last year or two , a large portion of the same-store benefit we got was price-related and not a lot of necessarily guest traffic-related. Our expectation is guest traffic does improve. We have a positive guest traffic expectation, and that would impact, obviously, both prepared food and grocery. You still got a couple points of price coming through there, but not enough. We're not looking for margin expansion via price over this period of time.
And-
Tom, you want to give a little more color on how you see that falling out over the next few years?
I think one of the, one of the benefits that we do have, as opposed to just taking frontline retail, is we're getting a more favorable mix. You know, you think about items like the King's Hawaiian Sandwich, right? Which is a net new item, an innovative item that's coming in at a higher retail. As guests, you know, engage with that, right, it naturally influences a higher mix.
Okay, what are your thoughts just with respect to ROIC improvement by, you know, through from 2024- 2026?
Yeah, we're not gonna walk into this with an expectation of another 130 basis points is gonna magically happen necessarily, right? That number tends to historically move at a slower rate. There's no doubt the $0.13 CPG benefit we got in the last three-year period of time obviously kind of turbocharged that improvement. All of the compensation programs that we have from a long-term incentive standpoint, all of those targets are predicated on ROIC continuing to get better. That's probably as much as I can give you, but it's gonna be a positive number. I just wouldn't anchor necessarily on the 130, because fuel influenced the pace of that quite a bit.
Okay, sorry, my last question is just with respect to the zone pricing, so that's a very early stage, but is there anything more color you could give on that with respect to how that could help drive the comps?
Tom?
Well, yeah, it's really early days, right? We're essentially in the midst of our first pricing test, we're still evaluating the data, we'll make decisions following that analysis.
Okay.
Good afternoon. Yeah. Bobby Griffin from Raymond James. I guess I wanted to circle back to the fuel side, doing some more work, going further back inside the supply chain, so maybe a multi-part question here. What are the investments, whether it's capital or systems or people, that are required to do that? Then the second part is, you know, what is that worth, you know, one or two pennies over a long term, kind of over a cycle or over a three-year plan? Is there any risk, you know, that we should be aware of that come about, you know, when you go further back into owning it, further back on the supply chain?
Yeah, sure. You know, what we're talking about is shipping product up the pipeline from the refinery gate, as Nathaniel alluded to earlier. Yeah, so there's a couple of components to it. Yeah, first, there are some system requirements. Now, part of the systems work that we did over the last couple of years set the foundation for that. The incremental systems work isn't as heavy a lift as it is, so I don't have the dollar amount invested, but it's not a significant or material cost. It's more of process and procedures and getting the right discipline around that. Anytime you ship product up a pipeline, you take possession of it in the pipe, and it goes up the pipe.
Depending on how long that travels, it'll be 12 to 18 days in the pipe, and then what you're trying to protect and where the risk lies is the cost of that product can change during that transit. What you're trying to do is protect the cost so that it's worth the same value at the back end as it was on the front end. There is a risk management body of work that has to be stood up to help control that. That's part of the work that's actually underway right now, is developing out those processes and procedures. You know, from our perspective, we won't be doing any speculative hedging on fuel. This is...
Any hedging that we do will simply be price protection on the trip up the pipe. In terms of the value, you know, that's going to be lumpy because the arb isn't open all the time, so this isn't something you're just constantly shipping. When the arbitrage window between, primarily for us, the Gulf Coast and the Midwest, is open, we'll ship, and there could be several cents a gallon arbitrage opportunity there, and then sometimes that's shut down. Over the course of time, a penny or two, but, you know, that'll be lumpy in terms of when you experience that benefit and when you don't.
All right. Very helpful. I guess lastly for me, maybe just switching gears. Can we touch a little bit on the media network? You know, what's kind of assumed there in the three-year plan, or is that potential upside, and kind of where you are in that journey?
Tom, you want to take that?
Yeah. Where we're looking at it right now is really building out the capability, building out the engagement with it. Really, in first year, from an EBITDA impact standpoint, we're assuming it to be neutral. Obviously, we're really excited about the potential of it, not only over the course of this three-year plan, but really into the future.
Yeah, I would reinforce. Anything we get net from retail media would be incremental to the expectations we just laid out.
Thank you.
Chuck?
Chuck Cerankosky with Northcoast Research.
Chuck, could you-
Chuck Cerankosky with Northcoast Research. When you're looking at your future expansion, what role will stores play that don't have fuel? How might those enter M&A strategy?
Yeah, you know, as we look at that, we have three non-fuel stores right now, and we're still learning and assessing that. You know, the intent with non-fuel stores all along was really to allow us to penetrate certain trade areas where putting a full-blown convenience store with fuel just wasn't practical, and that could be for a couple of reasons. It could be due to permitting or entitlements, where we're just, you know, physically aren't allowed to sell fuel. Other places where we identified pockets of demand, but we can't find real estate to put a store in, but we know people want our convenience. Like I said earlier, you know, 75% of our transactions do not involve fuel. People definitely use our stores for things other than fuel.
We'll continue to use that as an infill strategy to penetrate those pockets of demand where we can't get fuel in otherwise.
Thank you.
Anthony?
Hey, guys. Anthony Bonadio, Wells Fargo. I just wanted to touch on the competitive environment a little bit. There's a lot of talk right now at both major dollar store chains about investments in both labor and price. Just given you guys have quite a bit of overlap, especially with that core rural customer, can you just talk about the potential implications from that? What's factored into the targets you've shown us today from a competitive perspective?
Yeah, I'll touch on that briefly. I'll let Ena comment on that. I think, we've had some other people ask about what they're seeing with some of the dollar stores and how we're looking at that. I think those are 2 very different dynamics. It really all depends on where you start. I think in their case, they've decided that they weren't providing the level of guest experience that they wanted, they felt like they needed to invest in labor to do that. From our perspective, we've seen rising guest satisfaction scores, we think we're delivering on that guest experience, our comps would suggest that we're doing a pretty good job of that. Where we've had more opportunity, to what Ena said, was just being more efficient about how we deliver it.
We're really kind of going in a different direction.
Yeah, sure.
Go on then.
That 2.3% labor savings year-over-year was not an accident, right? It was a concerted effort on our part to take labor out of the store, make it simpler to run the store, investing in our team members. Actually, by doing that and giving them more time back, slack, they're less stressed, right? When you're less stressed, you serve the guests better, and that's why our satisfaction scores are going up. We're able to do this just by making it simpler and taking the complexity out of the store. We're looking at it in the opposite way.
Just a simple example is when we installed smart safes into the stores. Well, we still a lot of customers use cash still, believe it or not. There's a lot of cash being used, and so that cash was getting into the registers, and manager would have to drop it into a safe, and then you have to pull it out of the safe. You have to count that cash, and then you have to bundle it in a deposit, then you had to put it in a bag, you had to get in your car, and you had to drive to the bank, and you had to wait for the bank and all that process. A huge suck of manager time, which adds zero value other than getting the money in the bank.
Now, the smart safe, you put it in the safe, the safe counts it, the safe bundles it. An armored car guy comes and picks it up and takes it to the bank. The manager does nothing. That's a lot of time that has just been taken out that was not value-added. Now, that manager can spend more time with their team on the floor, coaching and training, and delivering better guest experience.
That's a good example.
That's just one example of a number of things we've done.
That's helpful. Just on private label, as we look at the success you guys have had, expanding that offering to date, including into less traditionally penetrated categories, see a generally receptive consumer for these additions, can you just talk about how you're thinking about the ultimate end game for private label now? Is it fair to say that the opportunity may now be bigger for you guys than historically been perceived? How does the return profile change as you sort of move up the curve from the low-hanging fruit?
Tom, you wanna talk private label?
We're extremely proud of our program. You know, to think about where we were 3 and a half years ago to where we are today, in the almost 10% mix in terms of units and gross profit dollars. Certainly, we've picked a lot of low-hanging fruit, and we've gone into other categories as well, that are a bit more of a challenge. We still see upside, and we still see continued opportunity for growth. We are very excited at the continuation of the expansion of the Casey's brand. Obviously, as we do that, right, it certainly mixes up our gross and general merchandise margin overall, which of course, impacts total store margins. Feeling very bullish about our certainly our near and medium and long-term prospects.
Yeah, I think I'd just build on that a little bit.
Mm-hmm.
where we see some opportunities to further expand. There's still some categories where we're not necessarily convinced that we need a national brand, where we can actually replace the national brand and just have our own, and those are very margin accretive when we do that. We can go into more premium items. We've kind of taken care of the baseline in terms of national brands, but we can upscale some categories with more premium products, that are still at a significant value to the guest, but more margin accretive to us. There's just a number of different avenues we have to go, but we're continuing to optimize in the categories we are, and then we'll go and expand in other areas. Hey, Ben.
Hey, thanks very much. Ben Bienvenu with Stephens. I ask two follow-up questions. One, to Bonnie's, the 8%-10% EBITDA CAGR. Just to clarify, is that off of the base of FY 2023?
Yeah, as reported, FY 2023.
Okay
is the target.
Great. Then a follow-up to Bobby's question on the fuel and the shipping capabilities. Do you have a target for what % of gallons you'd like to ultimately have under that program, kind of understanding that it might be variable along the way.
No, we really haven't set a target for that. Again, it's going to be as the market determines when there's arbitrage opportunities and taking advantage of that. We haven't gone as far as to try to set any targets or goals around that yet.
Okay. One more, if I could. On the in-store margin opportunity, improvement, you've noted you're committing to improvement over the next several years. Can you talk a little bit about the sequencing and the components of that margin improvement?
Mm-hmm.
Understanding, you know, commodities are starting to go the right way for you a bit. You've got the private label initiative, maybe some of the other things, and the order in which we should expect them to contribute.
Yeah, maybe I'll start with that. If you put it into the two pieces, the grocery business and the prepared food business, it. We clearly made more margin progress in the last three years on the grocery side of the business, obviously, than we did on the prepared food. Our base expectation is that almost flips going forward. You know, we were running mid-33%, inside on the grocery business at the end of last fiscal year. That benchmarks really well relative to others in that space. I'm not sure I would assume that we're gonna harvest a lot of incremental yield out of the grocery business. We're doing some things to mix up, to Tom's point.
I think we'd be more likely to reinvest that from trying to increase velocity on the grocery side of the business. The opportunity is certainly squarely on the prepared food side, where we were a couple of hundred basis points behind, where we started the last three-year period of time. Commodity inflation obviously played a big piece of that. We've made a couple of fundamental changes in that business, too, though, just as a reminder, right. Previously, we didn't have Casey's Rewards. Casey's Rewards, when you think about the cost of redemptions and the cost of accruing points, that tends to go against the pizza side of the business, so that's a change. We also didn't have third-party delivery at the beginning of that period of time, that tends to be a cost of sales item.
Also, obviously, we're delivering pizzas, so it goes against prepared food. Having said all of that, our philosophy is to kind of price through the cycle from a commodity standpoint, commodities go up at once, they go up fast. We follow that directionally, but we never quite catch up to it in the moment. Eventually, the commodities inflect, right? We're not gonna lower prices in that category, you capture margin on the back end. Generally, commodities are inflecting as we sit here today, which is consistent with kind of our assumptions. I would certainly expect in the short term, the margin improvement is gonna be disproportionately located on the prepared food side, just because of what's happening in the commodity input cost.
Kelly?
Thank you. Sorry. Thank you. Kelly Bania from BMO. I think there was a comment on the prepared foods, about some exciting things to come. You talked about the thin crust, the lunch day part. I was wondering if we could just dive deeper there on what that could contribute over the next few years, and maybe even kind of a look back on innovation and what that's done over the last three years, and how that could contribute to the prepared food comps?
Tom, start?
Certainly, you know, we're really excited at the innovation as Brad highlighted earlier, right? You know, BBQ Brisket Pizza, right, was such an amazing limited time offer that we put it on the permanent menu because of the reception that we got from guests. I think when you think about innovation for us going forward, definitely pizza as the crown jewel. We know there's still a lot of runway for future crust innovation. When we think about future crust innovation in pizza, it's really about creating additional sales layers. It's not just kind of, you know, a limited time offer that we're going to generate excitement with, which will certainly benefit the category and benefit sales.
It's really about creating new layers, new occasions, thin crust is certainly, you know, the first iteration of that on the pizza front. There's all kinds of opportunities when you think about appetizers and sides. You think about day parts, so lunch is certainly a big opportunity for us, but also to continue what we do at breakfast and do it even more, do it even better. Then you think about things like, you know, the afternoon day part, the happy hour type of opportunity. We're really excited at all of the runway for growth that still exists, even with, you know, the strength of our prepared foods platform as it is today.
Lastly, I would just say that, you know, dispensed beverages remains a big opportunity for us, and we're very excited to test made to order in that regard, 'cause that's certainly from a mix standpoint, right? My point about we're not looking necessarily We can't, you know, we don't wanna be passing on so much pricing to the consumer, given all the other pressures that are in the economy. As we introduce premium items that have a high attachment rate, that really drive a lot of trial, just naturally, you know, our price mix ratio, mixes up as we get engagement with those items, and we are seeing that with some of our latest innovations.
I think the exciting thing for me about this conversation is that, we're a convenience store operator. Here we are talking about culinary innovation.
Mm-hmm.
in the food pipeline and everything else and having played in the restaurant business and in the convenience store business, this is the fun stuff. It's very unique in our industry to even be having a conversation like this. You know, we talked about the differentiators of Casey's, and this is clearly one that it is a big one for us, probably our single biggest one and very, very difficult to replicate. Yeah.
Thank you. Krisztina Katai from Deutsche Bank. I had a follow-up question to the food acceleration plan as well. First, if you could maybe talk about how you get that fuel-only consumer to really start to engage with you more, and increase some of those cross-selling opportunities you see inside the store. Second, can you talk about how you envision competitor response, to your menu innovation, and if you're taking any more market share, how do you see that play out?
Yeah, I guess I can talk a little bit about the conversion. You know, that's where our rewards platform really comes into play with 6.5 million members. We've been on a cadence for probably two years now of adding about 100,000 new members a month to that platform, it doesn't show any signs of slowing. That's good for us because that gives us that mechanism to talk to our guests directly. When we see, or our digital team sees somebody that's a fuel-only customer but doesn't ever come into the store, we can target them and send them a differentiated offer to encourage them to go in the store. What's great about the rewards program is we can do that throughout the assortment.
We have guests that come during the week for a slice of breakfast pizza but don't ever buy a whole pie on the weekends. We can encourage that behavior. We have guests that come in for an energy drink and a pack of cigarettes during the week, but they never fill up their fuel. We can move people around the store with that technology, that's why we've spent so much time and effort on the rewards program. I'm sorry, I lost track of your second question.
The second one was just about the menu innovation. You're going more after the lunch day part, so how do you envision competitor response to that, or how you envision that playing out?
Tom, you want to talk about it?
I think, you know, it's obviously very competitive environment to begin with, and we see a lot of price promotion. You know, for us, we certainly want to make sure that we have a compelling offer that's gonna be a traffic driver and swing the door. But it really comes down to delivering quality, consistently delivering things that are unique and you can only get at Casey's. We feel really good, not only about our current lineup, but the process that we have in place for how we approach innovation, and how that's going to allow us to be differentiated in terms of the experience.
That's just talking about what you can get for food, then, of course, you layer over the rest of the business and the fact that you can not only get an amazing prepared foods item, you know, for various day parts, but you can, you know, you can pick up your packaged beverage, right? You can pick up tobacco, you can pick up snacks and candy, and everything that we offer in the store. That really is overall such a unique differentiator for us.
Hi, guys, Scott Stringer from Wolfe Research. I wanted to ask on CPGs. You guys have kind of guided or at least hinted at mid-30 CPGs for this year, and then also through this three-year plan. Typically, I would think that would grow, you know, low single digits just based on inflation of your operating expenses. How should we think of CPG growth, maybe over the next three years or even longer term?
Steve, you want to talk about it?
Yeah, I'll start. We didn't technically guide the mid-thirties for the current fiscal year. Just to be clear, that's our modeling, our modeling aid.
Yep.
Historically, pre-pandemic, when I go back and look at it, CPG, we were kind of mid to high teens in those couple of years pre-pandemic. Seemed to grow consistent with CPI, right? Whatever your starting point was, it kind of ticked up consistent with CPI before the pandemic obviously turned everything over. I'm not sure why that wouldn't eventually return as a realistic slope of that line. If the industry has right-sized itself to, this is the level of CPGs kind of required to maintain profitability, right? Brian mentioned, how much CPG is floating the boat for all of the small players in the industry, 'cause otherwise, they're upside down completely. You know, our expectation is that probably would be the path that it goes back on.
I don't know why, absent another shock to the system of OpEx really going up again, which is what precipitated the increase in the first time, CPI kind of growth feels consistent, until proven otherwise for us.
Yeah, I think I'd just take it back to the composition of the industry.
Mm-hmm.
Remember, as I mentioned earlier, 100,000 of the 150,000 convenience stores and chains of 50 stores or less, but 90-plus thousand of those are in chains of 10 stores or less. They just don't have the leverage to pull to overcome the cost increases and the pressures that are on those businesses. Fuel is probably the cleanest and easiest way to do that. With that many stores, you know, pricing a certain way, that kind of sets a baseline for where the market is going to be, the market prevailing prices. The operators that are more efficient, obviously, can enjoy the benefit of that. So I think, as costs continue to rise, those operators are going to have to do something.
We don't think they're gonna price themselves out of business, so they're gonna have to do something, and fuel is probably the single biggest lever they have to pull to achieve that. Oh, all right.
Thank you.
Go around again.
Don't feel obligated to ask.
Yeah.
Yeah. Yes. I think we have a few minutes.
I wanted to ask about store growth. You have this target of the 350+ stores in the next three years, about 110-120 on average each year. My question is: Is there anything preventing you from really stepping that up maybe more aggressively? You know, is there something in the infrastructure? I'm just thinking about, you know, how you laid it out with, you know, your footprint and the opportunities and the white space. You know, why couldn't you lean in more aggressively in terms of building more stores? Is there any way you could break down for us or give us a sense what % of that is gonna be, you know, organic versus acquisitions?
Yeah.
Could change.
Sure.
Just what are you sort of committing to in terms of building?
Yeah. You know, first, I'd say that as we go into the next three years, we kind of model this as 50/50 between organic and acquisition. Admittedly, that 50/50 is because we really don't know how that's gonna play out. We know that we can achieve that mix pretty ratably. As you saw in the last three years, Brian alluded to it, I think when we stood up here three and a half years ago, we clearly thought that we were gonna be more heavily organic, the world changed on us, we flipped over, the next year, we bought 200 stores. It just...
The great thing about the way we approach it is we have the capability of doing either one, and we can pivot pretty quickly to take advantage of whatever environment is working best for us at the time. In terms of the question about acceleration, we've modeled the 100 or the 350 because we know that's pretty ratable, but we said at least 350. I think the thing to keep in mind is we're still out there in the market assessing these larger deals. When we say 350, you know, a mix of, you know, half and half, that's the small deal M&A, you know, smaller chains, individual sites, and then, of course, our organic growth.
You know, it's become a pretty frothy market right now, and we're keeping Brian real busy.
Mm.
On the M&A front. You know, there's a potential to layer on top of that with some more. That's, that's kind of how we're viewing it. We want to make sure we're able to take advantage of those larger opportunities when they present themselves. You know, in terms of the guidance we want to give, we've got this 350 store mark that's pretty ratable for us.
Just a quick follow-up. Is there anything that's preventing you from just stepping up on organic? You know, doing... Building 100 new stores every year, leaning into that, levering up, you know, again, thinking about your distribution centers and leveraging all that white space?
No, the, you know, there is a timeline component to that. I mean, it's, you know, it takes time to find the site, to get entitlements to it, to close on the site, to build the site, the entire process. The, you know, we could say go today, and it's gonna be 24 months from now before you see the outcome of that. But I mean, from a balance sheet perspective, I mean, clearly there's no capital constraints. Operationally, our team can do it. If we wanted to accelerate more, we'd probably bolster up the organic real estate team a little bit more to accelerate that. But again, in the near term, that takes, you know, 18-24 months to really bring it to life.
Yeah, I think maybe the point I would add there is, like, today, for the incremental unit, we can buy it cheaper than we can build it, right? It's $1 million cheaper on average for us to buy it. If there are a lot of prospects for us to buy, that we can immediately put a kitchen into and actually buy it and renovate it in a shorter period of time than the 24 months required to kind of de novo it, that actually it makes more sense on the margin for us to lean into that right now.
Here we go.
John?
John Lawrence with Benchmark. Darren, can you comment a little bit about this you mentioned on the slide about Buchanan? Just dive in a little bit about the synergies that you still have to capture there and sort of the process of how you're going about that.
Yeah, I think largely we've captured all. I think there's just a little bit left. I think that's more got to do with a couple of stores that were identified as rebuild opportunities, and we need to rebuild, and maybe a couple remodels left.
Yes, we have a couple left.
A couple remodels, but that's about it. The overhead synergies have been captured. They had a distribution center that we've decommissioned and consolidated that into ours. We've remerchandised and remodeled the vast majority of the stores. We're just about at the pro forma target synergies that we anticipate, and we just have these couple of remodels left to kind of close that gap.
Thanks. Secondly, has anything happened with those operators? You've mentioned how tougher it is with them without the scale. Can you talk about, as you look at those, what's changed for those operators, specifically in the last three years that we were here?
Uh-
... you know, Brian's busy, et cetera.
Yeah.
What's really happened with that profile?
I'd say the entire world's changed on them. You take COVID aside, I mean, COVID, obviously, in the moment, was a significant impact, but the tail impact of that has been, you know, huge. I mean, you think about the supply chain challenges that everybody's dealt with, when you have no scale and you have no leverage, they're the last on the list to get any help from a supply chain perspective. You've got, you know, record-high inflation that's hitting everybody, you have no scale, so you can't push back on suppliers or service providers. You don't have any scale to negotiate with, you just take the hit on that. Labor shortages, it's really difficult to hire people, in some cases, these people are having to run shifts themselves.
You know, we took over some stores recently from an acquisition, where the stores weren't even operating at their full hours. They were understaffed. In some cases, they were just closed. Great real estate, great boxes, but just closed. We have centralized staffing capability, where when we knew we were going to take possession of those stores, we started hiring already. We take possession of those stores, we had people ready to go. We open up the stores, normal price. Our sales, in some cases, have doubled in those stores just because we had the capability of staffing them and supplying them, where the smaller operator just wasn't able to do that. It's just been a challenging environment for everybody, but this is where the scale comes into play, and we can bring some capabilities and overcome some of those obstacles.
They're just really challenging for a small operator. Hey, Ben.
I wanted to follow up on the Buchanan question. You guys have digested it. I think of those stores, those Buchanan stores, came with car washes. What have you learned about that business, and is that an offering you could scale out across the rest of the Casey's chain that could make sense? If why or why not, I mean?
Yeah, you know, we're still learning more about the car wash business, and it's okay for us. I'd say it hasn't been great for us, and I'd be lying to you if I told you we've cracked the code, and we're ready to accelerate in that. Frankly, you know, our focus is more on the prepared food side of the business, so we probably haven't put the full resources against trying to exploit that opportunity 'cause we've focused on other areas of the business. I still think that that is an opportunity. We just have to decide when we put that in the priority list with all the other things that we're working on right now.
Yeah, I think one of the challenges for us is just returns on capital, right? Especially if you're going to build a tunnel, car wash, right, it's $2 extra million on that site, and, you know, would you put $2 million for a car wash, or would you build a new store somewhere else, right? The car wash doesn't always make the cut when you look at it that way.
Yeah, Bobby?
Just one follow-up on store formats. I think a year or two ago, when we were out there, we actually toured one of the larger travel centers. You guys were kind of in the early learnings of what that opportunity could be. Just maybe now, after having a little time, seeing how that performs, what do you think the opportunity is for the larger stores? Would that be an area that you could see M&A if there was an opportunity to do that?
Yeah, you know, a couple things. One, those big sites perform really well for us, and, you know, we put quite a bit more due diligence into them because they cost about double what our normal stores do. We wanna make sure we get those right. The one you guys had the opportunity to visit was one of those that we put a lot of due diligence behind and has performed exceptionally well. We have acquired some travel centers.
Mm-hmm.
you know, single-site type travel centers and converted them, and those have been very successful as well. Yeah, we're open to doing that. We think we understand how to operate them and what resonates with with those guests, and Kendra kind of mentioned that before: showers, laundry service, seating, great prepared food, you know, well-lit parking, those types of things. Yeah, we're open to that. We just haven't found the right opportunity to do that at scale, but certainly on the individuals that we do that. Yeah, Karen.
Yeah, actually, just to follow up on that, within, let's just say, 50% of your stores are organic, what would actually be the split between the smaller, the standard, and the larger? Is there a difference in the return profile of those three formats?
Not a difference in the return profile. I probably have to defer to Kendra to know the breakdown, and that's gonna vary year to year. It depends on where we find the sites and the timing of getting the entitlements and being able to close. You know, our approach is more focused on the market attractiveness and going to the areas where we have the highest likelihood of success and focusing there. In some cases, those are very small rural communities, in some cases, those are more suburban-type, smaller cities. That'll really drive what type of store we build in any of those sites. Kelly, I think you had a question.
Just in terms of CapEx, I think there was a comment that 75% of your CapEx is growth-oriented. Did you give dollars, or Steve, do you wanna comment at all on the dollars for CapEx over the next three years?
Yeah, I mean, I think the guidance we gave for I'll say PP&E for the current year is $500 million-$550 million. If you think about, we're roughly building 50 to 60 NTIs a year, and you're spending $5-ish million or so on those, so $250 million-$300 million is going to be literally building new NTIs, and the other slug of that will be distribution-related, right? We have a huge backlog of trucks. We haven't been able to get trucks for several years, we'll spend more money than we normally would related to trucks. Somewhere in that $500 million-$600 million range, consistently annually, over that period of time, I think would be a safe assumption.
Remember, that would not include acquisition dollars, 'cause acquisition dollars would come obviously on a different line on the cash flow statement.
Yes.
When you shared your 8%-10% EBITDA guidance last three years ago, when you first came in, it seems like since then you've made a lot of pretty, well, much needed, but kind of obvious changes, in hindsight, obvious changes, to the business that have really been beneficial. I'm just curious, does the next three years, kind of keeping a similar cadence to what you shared three years ago, does it seem like a higher bar, that 8%-10%, now that a lot of the maybe low-hanging fruit's been taken care of?
Yes, it's a higher bar, for sure. You know, anytime you have to cycle over your own results, it gets a little more difficult every time. You know, when we look at, 'cause actually, we had a funnel exercise when we were building our plan. We went back and looked at the companies that were in that top quintile when we built the plan and where they are today. With few exceptions, most of them are now in the third quintile or fourth quintile, because. Not because they're doing poorly, it's just because it's more and more difficult to cycle. We think we have an algorithm that's largely in our control, that we can cycle those numbers and continue to grow at that pace. You know, we have. Steve showed the slide.
I mean, we've got 20-year, a 10-year, and a three-year track record of being able to do that. In some cases, much more aggressively, in some cases, not as much, but in all cases, you know, double-digit EBITDA growth. We feel very confident in our ability to control our own destiny from that standpoint. All right. I see no more questions. I think we'll go ahead and wrap things up. To close, I just wanna thank everybody for making the trip out here and for spending time on the webcast. For those of you who traveled, really appreciate your persistence and perseverance. I know it was not easy to get here. It was not easy for us to get here.
We all made it, and hope you found today's session informative, and look forward to seeing you again soon. Thank you.