Untitled - Clark Brands, LLC

Breaking Down the Brands
Valero Energy
Big Quote: “An area of opportunity for
Headquarters: San Antonio
us to unlock even more value out of our
Brand Network: More than 4,000
real estate is by changing our mindset
branded retail sites in 40 states, with
from a fuels retailer that also sells some
an expanding branded presence in
convenience items to a convenience
south central Mississippi. Valero offers
retailer that retails fuels.”
assistance with signage as well as a pro-
Big Move: As it looks to sell off its strug-
prietary credit card, point-of-sale incen-
gling refining arm, Sunoco intends to
tives and other marketing programs.
focus on its profitable logistics and retail
Big Quote: “Valero has been success-
businesses, particularly in Pennsylvania,
ful in rebranding stations that had been
Delaware and New Jersey.
branded with major integrated companies and with picking up new sites.”
Hess Corp.
Big Move: New growth markets include
Headquarters: Woodbridge, N.J.
the Great Lakes, Mid-Atlantic and
Brand Network: 1,360 Hess-branded
Southeast, after starting in the South-
locations (as of Dec. 21, 2011) across 16
west, West and Midwest.
East Coast states, from New Hampshire
to Florida.
Marathon Petroleum
Big Quote: “We are pursuing targeted
Headquarters: Enon, Ohio
growth opportunities for company-
Brand Network: More than 5,000 loca-
operated locations, both new builds
tions across 18 Midwest and Southeast
and rebuilds, in our key markets.”
states, a 9% increase since 2009.
Big Move: “We have a comprehensive
Big Quote: “It may seem obvious, but
strategy that includes new-product
our success as a brand is tied directly to
offerings, new store layouts, new pro-
our jobbers’ success.”
motions and use of social media.”
Big Move: Marathon supplies nearly
700 of The Pantry’s 1,600-store net-
CITGO
work across the Southeast; it has
Headquarters: Houston
targeted this region for growth with
Brand Network: 400 CITGO-branded
the addition of several jobbers whose
marketers with approximately 6,000
footprints span regional to multistate
retail locations in 27 states east of the
presences. New initiatives to build the
Rockies, and District of Columbia.
brand include the Marathon Spirit
Big Quote: “Our strategy is to continue
Fund, which offers co-investment
our focus on the distributor class of
opportunities for imaging or technol-
trade, just as we always have, and dif-
ogy; a new co-brand card; and a loyalty
ferentiate the CITGO brand through
program.
flexibility, strong marketing programs
and exceptional customer service.”
Sunoco Inc.
Big Move: Expects to increase branded
Headquarters: Philadelphia
locations by 8% in 2012. Rolled out
Brand Network: 3,349 distributor-
new Centennial image, enhanced
operated, 507 dealer-operated and
mystery shop, new loyalty program
542 franchisee-owned and -operated
and new Good Rewards consumer
locations in 24 states.
promotion.
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n the weight scale
of market strength,
Clark Brands LLC is
the puny kid on the
beach, overwhelmed
by musclebound giants such as ExxonMobil, BP and Shell.
But on a bodybuilding program that
would make Charles Atlas proud, the
Naperville, Ill.-based company is looking to double its footprint, stretching into
new markets from the Dakotas to Texas,
New Mexico to Michigan.
“We grow in areas where the majors
have vacated because of supply or we
grow with our partner marketers by providing an alternative offer to the majors,”
says Gregory Mauro, Clark’s communications and marketing manager. “There are
[retailers] who just don’t want to brand
with the majors. They don’t want to sign
a long-term agreement.”
“Big Oil would
rather pick and
choose where they
do business—and
with whom they
want to do business.”
Alon Brands
Gulf Oil
Headquarters: Odessa, Texas
Headquarters: Framingham, Mass.
Brand Network: 900 wholesale and
Brand Network: 2,500 branded loca-
company-owned sites in Texas and
tions and 1,000 private-branded loca-
New Mexico.
tions across 27 states.
Big Quote: “We bring distributors the
Big Quote: “To say that Gulf is merely
best of both worlds, by being atten-
in a ‘growth mode’ would be an under-
tive to delivering attractive, innovative
statement. We have tripled our field
services at the retail level, while main-
presence in expansion markets and
taining strong, dependable supply lines
have joined virtually every regional
uniquely available through our parent
petroleum trade organization available
company.”
to us in these new markets.”
Big Move: Aiming to grow beyond the
Big Move: Targeting a minimum of 150
Southwest; expanding Clean TEAM ini-
new sites per year for each of the next
tiative across entire Alon network; con-
five years.
verting all FINA sites to ALON fuel brand.
Hear more about Alon’s
wholesale initiatives at
www.cspnet.com/Alongrows12.
Tesoro Energy
Headquarters: San Antonio
Brand Network: Nearly 1,200 branded
retail locations across 18 states in the
Clark isn’t alone. A small group of
regional brands—a mix of mid-tier suppliers and marketers—are ramping up a
slew of enticements aimed at persuading
fuel distributors and c-store operators to
embrace their flag. The incentives include
marketing enhancements and revamped
branded images and payment offerings,
all in the hopes of winning a multiyear,
exclusive forecourt contract.
A two-month review by CSP involving
interviews with about 20 companies and
experts reveals the following:
▶ Plastic Power: Several regional oil
marketer/refiners are expanding branded
credit-card offerings, check-processing
programs and even gift-card options.
▶ Coast to Coast: Some brands,
notably Valero Energy and Gulf Oil, are
expanding from regional to national.
Valero, for instance, recently unveiled
its teal-and-yellow moniker at several
Clark Brands
West and Midwest, of which more than
Headquarters: Naperville, Ill.
375 are company-operated under the
Brand Network: 950 branded and
Tesoro, Shell and USA Gasoline brands.
unbranded sites in 29 states and the
Big Quote: “There are some real oppor-
District of Columbia.
tunities for us where we operate, both
Big Quote: ”We grow in areas where the
because of where the refineries are
majors have vacated because of supply,
located along the Pacific Rim and in the
or we grow with our partner market-
Great Plains/Upper Midwest area. …
ers by providing an alternative offer to
For lack of a better term, we’re bullish
the majors. There are [retailers] who just
on America.”
don’t want to brand with the majors.”
Big Move: Last fall, Tesoro announced
Big Move: Expanding in New Mexico
deals with Eden Prairie, Minn.-based
and Texas. ”The goal is to saturate as
Supervalu Inc. and Santa Fe Springs,
much of the Clark brand as we can
Calif.-based Thrifty Oil Co. that added
and to spread out within the states
292 locations to its network. The deal
where we are. That’s the point behind
“strengthens our refining and market-
the Western expansion: establish a
ing integration by about 12%,” Tesoro
firm foothold, open several flagship
president and CEO Greg Goff said at the
sites, grow the brand in those states,
time. In January, it announced plans to
and then move westward, and maybe
sell its 94,000 bpd Kapolei refinery and
northwest as time goes on.”
associated 32 stations in Hawaii.
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new outlets, including in central Mississippi with Kelley Oil Inc. “As the Valero
brand continues to grow, especially in
the Southeast, we look forward to being
part of that growth,” Terry Kelley says of
the deal.
▶ Revitalizaton: After taking a hit
during the Bush-Chavez tete-a-tete,
Venezuela-based CITGO is bounding
with newfound optimism—and for
good reason. The company earlier this
year rolled out a platform of improvements, including its new Centennial station image and partnership with loyalty
companies such as Outsite Networks and
Centego. Stepped-up services, coupled
with a ready fuel supply and lower-cost
alternative, have helped CITGO add 450
locations in each of the past two years,
according to the company.
▶ Positive Transitioning: In Texas,
Alon is swapping out the legacy FINA
fuel brand with its ALON brand. Already
fielding a network of 900 wholesale and
company-owned sites, Odessa-based
Alon is pursuing a national brand strategy. “We literally could double our size
within our current boundaries,” president
and CEO Kyle McKeen tells CSP.
▶ New Landscape: Higher fuel economy (CAFE) standards on cars, coupled
with steep prices at the pump and declining fuel margins, have prompted major
oil companies to exit several markets
where they are not top players, giving
way to new opportunities for regional
and local brands.
Shifting Landscape
It would be simple-minded to dismiss
major oil or discount the slew of initiatives the companies have initiated in
recent years, from anti-drive-off security
at the fuel island to effective cents-off
branded credit cards.
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Top 25
Brands
by Station
Count
see as many majors and,
A glance at banner
1. Unbranded: 17,840
in some cases, you won’t
presence easily favors Big
2. Shell: 14,491
find them at all.
Oil. According to OPIS,
3. BP: 9,466
“Instead,” he continfor example, Shell’s flag
4. CITGO: 6,952
ues, “you’re going to see
waves at nearly 14,500
5. Chevron: 6,473
more independents take
stations across the United
6. Exxon: 5,780
on a greater share of the
States. Marathon, the
7. Marathon: 5,368
markets because they
largest regional banner,
8. Valero: 4,915
can afford to operate at
stands at less than 40% of
9. Sunoco: 4,843
a lower margin. And at
that total, with 5,368. (See
10. Mobil: 3,999
the same time, they’re
chart at right.)
11. Phillips 66: 3,048
improving on image
Simply put, Big Oil’s
12. 7-Eleven: 2,571
standards, credit cards
retail presence is alive and
13. Conoco: 2,553
and other services.”
well—just not as big or
14. Gulf: 2,184
It’s no secret that most
alive as a decade ago.
15. Texaco: 2,015
of the majors—notably
“If you think Big Oil is
16. 76: 1,936
BP, ExxonMobil, Chevgoing away, think again,”
17. Casey’s: 1,722
ron, ConocoPhillips
says Cathy Duncan, exec18. Sinclair: 1,647
and Shell—have shifted
utive director of marketer
19. Cenex: 1,612
attention to lucrative
solutions for Omaha,
20. Hess: 1,359
upstream opportuniNeb.-based Telvent DTN.
21. Speedway: 1,318
ties. As part of the move,
“Big Oil is doing what
22. Arco: 1,274
they have culled directthey want to be doing.
23. Circle K: 1,267
operated retail networks,
They’re not losing busi24. Murphy USA:
selling off much of their
ness where they choose
1,012
downstream oversight to
not to lose business.
25. Kroger: 770
independent fuel mar“That said, Big Oil
Source: OPIS
keters and midsized to
would rather pick and
large retail chains such as
choose where they do
business, and with whom they want to Alimentation Couche-Tard and 7-Eleven,
do business,” she continues. “If they’re not maintaining fuel-supply agreements
No. 1 or 2 or 3 in a market, they’re pulling when possible. Additionally, they have
out. And that is giving more opportunity gradually increased volume benchmarks
to many of these regional brands to come and overall performance standards, driving out many smaller operators with two
in and scoop up some volume.”
Ken Shriber, managing director of to four multi-pump dispensers (MPDs).
In this wake, a mélange of mid-tier
consultancy Petroleum Equity Group in
Chappaqua, N.Y., observes the same trend: brands—some with their own fuel supmajor oil pulling out of markets where it plies, others without—has arisen to satisfy
is either not a brand leader or where the retailer tastes with a blend of fresh canopy
cost of doing business loses out to sliding imaging, margin improvements and better
one-on-one customer relations.
profit margins.
Just recently, Framingham, Mass.“It wasn’t so long ago where you had
majors in every city,” Shriber says. “You’ll based Gulf Oil LP inked a deal with Satstill find them in most, but you won’t terfield Oil Co. of central Arkansas to
“What you’re
seeing today is a
courtship between
these fuel brands
and the jobbers
and retailers.”
rebrand up to seven sites in 2012. Albeit
modest in scope, the deal is exactly what
Gulf CEO Joe Petrowski and senior vice
president Rick Dery promised just a few
years ago.
Dery, who also wears the hat of chief
sales and marketing officer, called the
Arkansas move “an important milestone
for Gulf as we continue our national
downstream expansion.”
Better known as an East Coast operation with flags stretching along the Atlantic, Gulf is rapidly moving into the South
and as far west as Minnesota and Texas;
it boasts a retail presence of more than
2,500 stations.
“To say that Gulf is merely in a ‘growth
mode’ would be an understatement,”
Dery tells CSP. “We have tripled our field
presence in expansion markets and have
joined virtually every regional petroleum
trade organization available to us in these
new markets.
“Our primary focus is to identify and
work with great distributor partners
in every market. While our focus has
been initially on PADD1 and PADD2,
we have branding opportunities in both
PADD 3 and 4, as well as a new partner
in Puerto Rico.”
And Gulf is hardly alone in this
competitive landscape. Houston-based
CITGO is another example. Swirling
in a political maelstrom that saw it pull
out of 10 Midwestern
states only six years ago,
the company is targeting
8% overall growth in 2012
and recently bolstered its
forecourt and backcourt
program to its distributor
class of trade. (CITGO
does not own or operate
any retail sites.)
The company, according to Gustavo Velazquez, CITGO vice
president of supply and marketing, is
seeking to differentiate itself through
“flexibility, strong marketing programs
and exceptional service, reinforcing our
brand position as the most human, caring
oil company.”
While CITGO declined to identify
growth targets, it is publicizing many
new programs that are not only aimed at
expanding its network but also strengthening the quality of its sites through more
stringent mystery shops that carry both
rewards and penalties for strong- and
weak-performing outlets.
“Programs such as our new Centennial image, enhanced mystery shop, new
loyalty program, new Good Rewards
consumer promotion and Fueling Good
are crucial to support our marketers and
retailers in the current business environment,” Velazquez says.
The company detailed these programs,
which seek to strengthen operations and
profitability, during 18 marketer roundtable meetings recently concluded, he
says. “The new Centennial image has
contributed to the addition of nearly 450
new locations in each of the last two years
and we anticipate this positive growth
trend to continue in 2012,” he says.
Retailer Opportunities
Think of the old-school traveling sales-
men or the Avon lady—only here we
have a row of fuel brands knocking on
the doors of fuel marketers, c-store chains
and independent operators.
Some of the deals have, frankly, been
eye-popping. The biggest is Marathon
Petroleum’s exclusive agreement signed
in July 2010 to supply 600 of The Pantry’s 1,600-store network across the
Southeast. (The alliance has since grown
to nearly 700 sites.)
As part of the deal, the Enon, Ohiobased oil company agreed to something
extraordinarily rare in fuel-retail relationships: It took the unusual step of launching a customized ad campaign jointly
promoting its brand and The Pantry’s
Kangaroo Express stores. (Visit www.
cspnet.com/PantryMarathon for more.)
“The deal was a coup for The Pantry and
made good sense for Marathon,” a source
familiar with the deal tells CSP on condition
of anonymity. “The Pantry got a fabulous
pricing deal. And in return, Marathon got
a long-term deal with huge volumes. When
you’re willing to commit that kind of volume for a long time, it’s a give-and-take in
which both companies win.”
Such grandiose pacts, however, are
the anomaly. More common are agreements inked with operators of 20 or fewer
locations—a rich terrain when considering that single-store operators make up
58% of all convenience stores.
“This is good for the retailers and
the jobbers,” consultant Shriber says of
the rise of regional fuel players. “Many
of these companies are putting out very
compelling offerings into the marketplace,
including dollars for image upgrades, for
advertising, for in-store services.
“Their marketing is more focused on
the individual retailer, whereas the majors
were more focused about their brand,” he
continues. “What you’re seeing today is a
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courtship between these fuel brands and
the jobbers and retailers.”
Regional Opportunities
Traveling through the Deep South, it was
commonplace a few years ago to find
BP or Shell or, for the price-conscious,
CITGO. But today, Gulf, Valero, Marathon and others are chipping away at that
share and capturing a niche presence.
Kelley, of Kelley Oil in Waynesboro,
Miss., echoes the sentiment of many
when, of his deal with Valero, he says,
“Although the Valero name is new to
many motorists in these parts, it is well
known in the industry as one of America’s largest refiners and suppliers of quality fuels to thousands of independently
owned gasoline stations like ours.”
This scene is playing out across the
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“A convenience
store could see
44,486 fewer
customer visits
per year by 2025.”
country, with small and
moderate-size jobbers
and retailers signing with
brands that either didn’t
exist in their markets just
a few years ago, or whose
offerings failed to measure
up against the majors.
“When smaller stations
are competing against the bigger independent chains, they need a brand [value]
to help them,” says Fred Rozell, director of
retail pricing for OPIS, Wall, N.J. “And the
mid-tier brands are coming in to help.
They see an opportunity to partner with
many of the smaller retailers.”
This is precisely the strategy of Clark
Brands. “For the marketer, we’re a utility tool to help retain or acquire those
dealers that don’t want to sign with the
majors,” says Mauro of Clark. “And we’re
also the go-to folks when you’ve got a
new location or a single-store offering
that has a special need that the majors
may not address.”
And like the independent c-stores,
smaller and midsize jobbers are also
working with more regional fuel brands.
“Four thousand of our members are in
fuel marketing, and I would say all of
them have relationships with at least two
to three brand options,” says PMAA president Dan Gilligan.
“They’re looking for the brand options. None of them are solely
wedded to major brands, because they want to give their retailer
networks the best options.
“We have members who have converted some of their sites
from major oil to Valero or Gulf or Clark. As the major brands’
standards get more difficult, I think what you’re seeing are jobbers who are adding more local brands to give their dealers more
flexibility to have a brand that has programs and an image.”
A Difficult Decision
Deciding which fuel brand to partner with is increasingly
complicated. Historically, retailers hitched their store on the
reputation of a prominent flag. Align with a major and your
business instantly won credibility.
This scene has dramatically changed over the past 15 years.
Indeed, the recently released 2012 NACS Consumer Fuels Report
suggests that primacy of the gasoline brand continues to decline.
When consumers were asked which factor was the most
important in their buying decision, brand finished third, falling
from 10% in 2008 to 8% in 2012, according to John Eichberger,
NACS’ vice president of government relations. Not surprisingly,
price dominated and location finished second.
However, brand name remains an important attribute,
Eichberger and others are quick to underscore. But other elements have come to the fore, especially for retailers. Among
those factors: guaranteed supply, pricing and pricing flexibility,
loyalty and credit-card programs, image and security incentives,
and customer service.
“It’s about the value and perceived value to the customer,”
Eichberger says. “How is the brand viewed? If it’s a strong private
brand, it can compete quite well head to head against a major
oil brand.”
“There is no one-size-fits-all when it comes to choosing a
brand,” says Mark Hawtin, senior vice president of strategy and
business development for KSS Fuels, Florham Park, N.J. “We
see the decision is becoming more complex to the retailer.”
And it’s about to become more complex.
Miles to Go?
As a battle royale brews among the brands, another story is taking
place that could radically alter the industry’s forecourt.
U.S. motorists drove 1.2% fewer miles in 2011, the lowest
level measured since 2003, according to the Federal Highway
Administration. And the distance covered has continued
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to drop since 2008, due to the weak
economy and high prices at the pump.
And now there’s another piece to
consider. The Obama administration
fast-tracked by four years new CAFE
standards established as part of the 2007
Energy Independence and Security
Act. Instead of 2020, automakers must
by 2016 deliver fleets that meet a minimum 35.5 miles per gallon. (Standards
currently are determined by the 1985
requirement of 27.5 mpg.)
The CAFE changes could have a
dramatic effect on retailers, Eichberger
wrote recently in NACS magazine: “For
a convenience store that services 277 fuel
customers each day, the number of fuelbuying customers could drop to 155. … A
convenience store could see 44,486 fewer
customer visits per year by 2025.”
The issue, he says, is more involved
than how it appears. Some automakers
say better mileage may also mean smaller,
more efficient engines, thereby resulting
in only a modest drop in fill-ups.
“There’s a lot of uncertainty now,”
Eichberger tells CSP. “But if vehicles are
able to get 600 miles on a full tank [twice
the current average], the attractiveness
of the fuel island as a destination will
become significantly less.”
In such a scenario, two competing visions emerge. The first: Major oil
brands will become even more valuable.
If I’m filling up less frequently, the logic
goes, then I’m willing to pay a few more
cents to get the gasoline with the best
additives to protect my engine.
Then there’s the other view: Fuel
brands will be defined almost exclusively
by consumer incentives and the c-store
brand. In other words, gas becomes strictly
a commodity. And in such a case, mid-tier
and private-label brands win the day.
Thus, it’s not surprising that compa-
nies such as Clark, CITGO, Marathon
and others are increasingly investing in
the consumer loyalty package.
“Our survey showed that in gas sta-
tions that offered a loyalty discount, 84%
of consumers shopped at those locations,”
Eichberger says. “It’s a big deal and it will
probably get bigger.”
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