(The number of U.S. convenience stores grew 1.2% over the past year and stands at 146,341 as of December 31, 2010, according to the annual NACS/Nielsen TDLinx 2011 Convenience Industry Store Count. A total of 117,297 c-stores sell motor fuels, a 1.7% increase over last year. Overall, 80.2% of all c-stores sell motor fuels.Click here for previous CSP Daily News coverage.)
In Canada, the trend reflects an average decline of about 2% per year, over a period of time when Canada's population, has been steadily growing. "This is a consequence of a continued lack of profitability in the retailing of gasoline," said Michael Ervin, the vice president and director of consulting services for MJ Ervin & Associates, a division of The Kent Group. Despite generally healthy oil industry profits over the past several years--at least until recently--the retail sector has always been a relatively poor performer: in 2010, the wholesale rack to retail markup on a liter of regular gasoline was less than seven cents per liter at a typical urban station, according to pump price statistics gathered by MJ Ervin & Associates.
Ervin notes that to be profitable, retail gasoline outlets must sell high volumes of gasoline in order to compensate for the low margins. They must also be effective marketers of pop, chips, car washes and other nonpetroleum offerings that tend to have much higher margins than gasoline.
"It's the stations that lack sufficient fuel sales or sufficient non-petroleum sales that are closing," Ervin added.
The study revealed that growth in "big-box" retailers of gasoline such as Safeway and Loblaws has stalled in the past few years. This category of petroleum marketer had proliferated in western Canada over the past decade, but had only seen limited growth in eastern Canada. The study suggests that a combination of low profit potential and some regulatory constraints may be responsible for limiting big-box retailers from further expansion in the future.
The percentage of retail outlets affiliated with refiners declined from 42.5 in 2008 to 41.4 in 2010, evidence of a continued strategy of refiners divesting retail assets at a faster rate than nonrefiner marketers. Conversely, nonrefiner marketers (sometimes referred to as "independent" marketers) were affiliated with 58.6% of all outlets in 2010, compared to 57.5% in 2008.
As to the question of who controls the retail pump prices at Canada's 12,710 stations, the study determined that 16% of gasoline stations are price-controlled by one of the three "major" oil companies (Imperial Oil, Suncor or Shell), while the majority of gasoline outlets in Canada are price-controlled by dealers or companies not involved in the refining of petroleum products.
The MJ Ervin & Associates report paints a picture of the diversity of gasoline brands, with more than 99 different brand names under which gasoline is sold in Canada, although most of this country's gasoline originates from 15 refineries, operated by nine refining companies. There are more than 71 companies involved in the retail management of these brands.
Click hereto download a free complete copy of the report.
MJ Ervin & Associates is a London, Ontario-based consultancy specializing in the petroleum refining and marketing industry. It publishes the Weekly Pump Price Survey.
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