CARY, N.C. -- The Pantry Inc. began the steps necessary to rebrand more than 200 of its stores from CITGO to Marathon and Kangaroo gasoline. The Pantry filed a document with the U.S. Securities & Exchange Commission (SEC) this past week stating that it would be debranding the CITGO sites.
In late July, The Pantry forged a fuel supply deal with Marathon Petroleum Co. LLC, the refining, marketing and transportation operations of Marathon Oil Corp. Under the terms of the agreement, Marathon will supply fuel to more than 600 Pantry locations, with a joint branding relationship [image-nocss] at approximately 285 of these sites.
The store and fuel forecourt rebranding will initially be introduced in Charlotte, N.C. Throughout the remainder of the year, all joint-brand location conversions will be completed across a seven-state southeastern marketing region.
(Click here for previous CSP Daily News coverage.)
On September 1, 2010, The Pantry Inc. entered into a marketer franchise agreement with CITGO Petroleum Corp., amending and restating the distributor franchise agreement with CITGO dated August 2000. They also entered into a transitional addendum to the marketer franchise agreement.
According to the SEC document, the marketer franchise agreement provides for CITGO to supply, and The Pantry to purchase, certain minimum amounts of gasoline, including branded and unbranded gasoline, and diesel for the company's specified convenience store locations. If the company fails to purchase its annual minimum contract volume, CITGO may charge the company a shortfall penalty. The price at which the company is required to purchase gasoline and diesel is specified in the agreement and is based on CITGO's net rack price per gallon, less specified rebates for which The Pantry may be eligible based upon its volume of monthly (and quarterly) gasoline and diesel purchases.
Additionally, the agreement provides The Pantry with the right to use certain of CITGO's intellectual property marks in connection with the advertising, distribution and resale of CITGO branded gasoline and diesel at the company's c-stores that will feature CITGO branding.
The agreement contains indemnity, insurance, payment (including a prompt payment discount) and delivery provisions typical of fuel supply agreements. The term of the agreement expires on August 31, 2013, subject to automatic three-year renewal periods if not validly terminated.
The transitional addendum governs the provision of branded and unbranded gasoline and diesel to certain of The Pantry's c-stores as those stores transition away from CITGO branding. The price at which the company is required to purchase gasoline and diesel is specified in the addendum and is based on CITGO's net rack price per gallon, less specified rebates for which the company may be eligible based upon its volume of monthly (and quarterly) gasoline and diesel purchases.
It also contains payment provisions (including a prompt payment discount) typical of fuel supply agreements. The term of the addendum expires on March 31, 2011, and either party can terminate it earlier upon 30 days' notice.
The Pantry amended and extended its gasoline supply agreement with CITGO in October 2005. In 2003, the company announced an agreement calling for CITGO to supply approximately half of its total gasoline volume for five years. That agreement included both CITGO-branded gasoline and private-label gasoline, most of which is sold under The Pantry's own Kangaroo brand.
The amended agreement provided for growth through the potential addition of more stores, and extended the contract's term by two years, through 2010.
(Click here for previous coverage of The Pantry's supply agreement with CITGO.)
Headquartered in Cary, N.C., The Pantry (as of July 29, 2010) operates 1,641 stores in 11 states under select banners, including Kangaroo Express, its primary operating banner. The Pantry's stores offer a broad selection of merchandise, as well as fuel and other ancillary services.
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