OAK BROOK, Ill. -- At a time when acquisition is ramping up, small and midsize jobbers find themselves precariously in the middlesqueezed between the big operators and the mom-and-pops.
Exploring the issue of industry consolidation in the May issue of CSP magazine, staff reporters found a resounding concern for jobbers forced to either expand or sell off their stores. It's that threshold decision. Am I going to be in this business or not? Can I make it in this business or not? Bob Bassman, partner with Bassman, Mitchell & Alfano, which represents [image-nocss] the Petroleum Marketers Association of America (PMAA), told CSP Daily News.
The question is especially poignant for small and midsize distributors, who are facing pressure in the store and on the forecourt to either embrace growth or bow out of the game.
It's harder for smaller jobbers and store groups to be in business, Bill Kent, president of The Kent Cos., Midland, Texas, a jobber with more than 20 mostly Texaco-branded stores, told CSP Daily News. We're being squeezed on the retail pricing from hypermarkets. And inside, margins [are being squeezed] on cigarettes and key categories. Inside it's very tough. It's become a serious volume game and tougher for the smaller companies to [survive].
PMAA president Dan Gilligan said this consolidation is obvious. In 2001, PMAA counted about 8,000 petroleum jobbers in the business; he estimates this number has fallen to 6,000 now. So many of the marketers I knowhave rolled their companies into others or sold, so the trend is without question occurring, he said. I don't know where the bottom is, but the jobbers keep getting bigger and there are fewer of them.
Compounding this challenge, ramped-up volume requirements by the majors have forced some smaller jobbers to take a position that only 10 to 15 years ago was filled by a dealeroperate the store but buy supply from a large jobber who enjoys a greater economy of scale.
Major oil's withdrawal from retail has also left its mark, much like a glacier that reshapes the landscape beneath it as it retreats. This has created growth opportunities for some and crisis points for others.
The success stories hit the news every day: Most recently, Eastern Petroleum Corp., a BP jobber based in Annapolis, Md., picked up more than 90 BP company-op and dealer sites in D.C. and northern Virginia. Baltimore-based Carroll Independent Fuel Co. snatched up another 70.
Although major-oil selloffs are contributing the greatest number of acquisition opportunities, jobbers have also picked up sites from c-store chains reassessing their portfolios. A Missouri jobber who asked not to be named is taking advantage of the moves that Ankeny, Iowa-based Casey's General Stores Inc. is making in the Midwest. He said that while Casey's has been acquiring, it has also been shedding stores.
We took on a few that fit our business model, the jobber said. In the past six months, the Missouri marketer has picked up nine stores, increasing his retail operation by 25%.
What exists today is what one lender called a highly liquid business environment. Todd Anderson, petroleum industry head, CitiCapital, Irvine, Calif., told CSP Daily News that equity and investment funds have brought money into the c-store channel. It's a liquid time in the market and this particular industry is enjoying reasonably good attention from commercial banking, he said. Local, regional and national banks have been receptive and are looking at doing more business; a traditional marketer who's well established is probably enjoying reasonable success [in obtaining financing].
Tomorrow, CSP Daily News will address how dealers fit into the acquisition equation. To read the first installment in this series, click here.
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