PHILADELPHIA -- Many gasoline marketers are cutting ties to major oil companies and refiners in favor of independent brands, said a report in the Philadelphia Inquirer. In October, Kevin Kan, CEO of American Auto Wash Inc., a chain of 18 stations with car washes in suburban Philadelphia, dropped the Mobil brand at two of his stations, started buying fuel from independent distributors and came up with his own brand: Griffin. Now he plans to franchise it to other retailers frustrated with the major oil companies' prices, said the report.
Switching [image-nocss] to Griffinwhich uses the mythical half-eagle, half-lion as its logoor other independent brands such as Oceanic, Liberty, Riggins or Garden State Fuels helps them compete with the region's low-price leaders, Wawa and Hess, it added.
Kan said his chain had seen a 35% jump in sales since late October, when it started buying gasoline from independent distributors. He said the sales gain was propelled by prices that had averaged about 6 cents lower per gallon than they would have been if he was selling Mobil fuels. Now, he is competitive with a nearby Wawa, and his gross margin is higher, he said.
Such results have convinced Kan and dozens of other dealers in Pennsylvania and New Jersey that it does not always pay to fly the flag of a major brand, the report said.
Kan said he planned to change the other two Mobil stations American Auto Wash owns to Griffin when their contracts expire. He may also switch some of the company's BP stations. We are going to brand our locations...the brand that will make us the most money, Kan told the newspaper.
In the Philadelphia market, branded gasoline typically costs 4 to 6 cents more per gallon than independent-branded gasoline, Ed Ellis, owner of Ocean Petroleum, a Maryland fuel distributor, told the paper. That's enough for consumers to notice, to say nothing of the dealers, said Ellis, whose company is about to put up its second Oceanic sign in the Philadelphia area this month.
The higher price for the major brands helps pay for the marketingsuch as Sunoco's sponsorship of NASCARthat makes them major brands. Sunoco spokesman Gerald Davis told the Inquirer that the company priced its products competitively and fairly.
The only difference between branded andunbranded gasoline, said the report, is a packet of additives mixed in when the gasoline goes into a tanker truck; however, there is a potential downside for dealers relying on unbranded gasoline. Most is traded on the spot market, as opposed to being sold under contract, as is the standard for branded fuel. That means the price advantage of unbranded gasoline can disappear quickly during supply disruptions.
Liberty Petroleum LLC, which has expanded from four stations in the Philadelphia area in June 2004 to 40 now, mitigates that risk by having a supply contract with a refiner, said Wayne Hummel, who manages Liberty in eastern Pennsylvania, New Jersey and Delaware. My guys get the lowest price most of the year, said Hummel, who previously managed Coastal Corp.'s East Coast operations.
Bob Brotzman, who owns a BP station in Havertown, decided this fall that he would test the market by posting the lowest retail price in the Delaware County town. The result: his sales tripled over two months, the report said. That proved right there that people don't have any brand loyalty, Brotzman told the paper. This month, Brotzman plans to switch from BP to Oceanic, the brand owned by Ocean Petroleum.
Dumping major brands also gives dealers flexibility in handling credit-card fees, which average about 3%. They were a big factor in Norman Zarwin's decision to end contracts with Sunoco at his two Philadelphia stations. Those station's now use Zarwin's Xpress Gas name and charge credit-card customers 5 cents more than cash customers. He could not do that under his Sunoco contract.
According to the Inquirer, customers at Kan's station in Morton, Pa., were oblivious to the change from Mobil to Griffin. I didn't even notice the name, motorist Mikala Miller told the paper. I just saw the sign that said new low gas prices.... That's all I pay attention to.
But some drivers remain skeptical about the new brands, the report said. One of Kan's Griffin customers said he might have passed the station by if he had noticed the change in brands. Ordinarily, I would have kept going, motorist Bill Henning told the paper. I've got this thing where I think I'm buying an inferior product if it is not a major brand. It might not be true, he said.
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