Down, But Not Out

After downsizing and Wichita store sales, Fleming Petroleum regroups

Samantha Oller, Senior Editor/Fuels, CSP

WICHITA, Kansas -- It's a drama that plays out on a daily basis in several cut-throat markets across the country: Small fuel retailer gets trampled in a price war between two giants. In this case, that small retailer is Fleming Petroleum Inc., Pittsburg, Kansas, which operates six stores in Kansas and Kansas City, Mo. As reported last week in CSP Daily News, Fleming had sold two of its three Wichita stores. The third location's future is uncertain at best.

As markets go, Wichita is one of the most competitive. Fleming's stores got caught in a price war [image-nocss] between QuikTrip Corp. and Kroger's Kwik Shop Inc. And while the retailer sells its own Fleming-brand fuel in Kansas City, where it has two stores, the Wichita sites were locked into a 10-year Amoco contract.

For Fleming, Wichita was a lesson in brand powernamely, the strength of the QuikTrip brand, and the limitations of Major Oil's.

"What we've seen in the last couple years is the total disparity between [QuikTrip's] ability to purchase gasoline for vastly lower cost than 'mere mortals'branded retailers and distributors like usand it's just almost like a killing field," Fleming president Ed Roitz told CSP Daily News yesterday. "A lot of small, one-to-two-store retailers are really feeling the pinch, and it's not getting any better from what I can see."

The store closings are also tangible evidence of Fleming's 15-month downsizing effort and attempt to regroup in a brutal fuel environment.

"Given the fuel situation in 2006, we had a very, very hard year," Roitz said. "We sold more gallons, but we made a whole lot less money; it wasn't a million dollars less, but it wasn't terribly far from a million dollars less. Man, the alarm clock went off, and we had to do something pretty fast."

In addition to selling the two Wichita c-stores, Fleming unloaded its standalone Kansas City coffee kiosk and thinned out its management ranks. Once the smoke clears and the retailer is done with the downsizing process, it will have a chance to consider what happens next. Roitz insists Fleming is not leaving Kansas City, but it might consider a franchise partnerc-store or restaurantto reinforce its offering.

Foodservice has been a small spot of light in Fleming's operations. Its Sarah's Kitchen concept, in operation at one store, and a similar unnamed program at another, "gives our stores something most c-stores don't have, and that's fresh, made-to-order food," said Roitz.

Fleming will expand foodservice "only if we're able to improve it," said Roitz. "There are some other chains like 7-Eleven getting into fresh food, produce, vegetables. I admire what they're doing. I think if we can develop programs like that, we might be in a situation to grow it again."