Editor's note: This is the first of a four-part CSP Daily News series highlighting the selling off of retail assets by the major oil companies. For a complete picture of how the retail landscape is changing, watch for the March issue of CSP magazine.
OAK BROOK, Ill. -- Name them: Shell, BP, ExxonMobil and, more recently, ConocoPhillips. The biggest oil companies are shedding downstream assets in what one industry observer called the largest selloff in his long and distinguished career.
Major oil executives have made their decision. [image-nocss] With that, the stage is set for winners and losers to emerge. Colorado's Brian Haldorson may be one of those who win.
If you're talking selloffs, I think it could be an opportunity for us to grow, Haldorson, president of A-B Petroleum, which operates 13 Denver stores, the majority of which fly the Conoco flag, told CSP Daily News.
Companies like ConocoPhillips say they want to use existing marketers to expand their business because it's a more efficient model to survive. That's what they said early on; whether they do that, we'll wait and see.
In December, Houston-based ConocoPhillips announced plans to divest all of its 830 direct-owned gas stations, including 330 company-operated and 500 dealer-run locations.
With major oil, it's a cyclical thing, Haldorson said. They all got back into retail in the last number of years, but it's difficult to operate retail, and the oil companies tend to follow each other. With the selloff situation in general, it's probably similar in a lot of areas nationwide. They tend to be pulling back where they don't have as much strength in direct supply.
From what the oil companies are saying, the pendulum has swung and it isn't coming back. Our plan, said Valerie Corr, spokesperson for BP Products North America, Warrenville, Ill., is to build the [BP] brand with a mix of company, jobber, dealer and franchise locations as part of the normal ongoing business activity to determine how to best serve customer needs in each area and site location.
Even so, BP continues to shift much of its network to a franchise-based model, with its ampm offering (perennially strong on the West Coast and now gaining traction east of the Rockies) becoming the company's retail brand of choice.
Entrepreneurs can deliver products and brands to more consumers in those marketing areas, said Corr. We think it's a growth strategy. Our goal is grow both, meaning the combination of in-store and gallon sales. Corr couldn't share, however, specific percentages the company expects to increase sales by moving stores into the hands of franchisees.
ExxonMobil routinely assesses the markets in which it operates in order to determine the most effective and efficient method of site operation, said Paula Chen, U.S. field public affairs advisor for Exxon Mobil Corp., Fairfax, Va. In markets where our direct-served business has been converted to distributors, we believe this approach provides us with the best opportunity to compete effectively and provide a strong retail offering to our customers.
It's a good thing, Dennis Ruben, managing director of Chicago-based NRC Realty Advisors, said of Big Oil's exodus from company-operated retail. You're seeing that oil companies are looking for distribution vehicles. Some want the real estate and some don't. Some are also looking to get out of direct operations. I think what's going on is creating more opportunities for a lot of people.
Harry Singh, president of Bolla Management Corp., Brooklyn, N.Y., a distributor and marketer of ExxonMobil, Sunoco and BP fuels, is ready to take advantage of the trend. Out in the suburbs, I expect that in another five years from today, another 20% to 30% of the market will be going to jobbers.
The market continues to change in an unpredictable manner, and that's one reason Singh believes in a blended approach. This blending applies to each of his more than 30 retail properties, making sure that each store has multiple profit centersgasoline, convenience store, car wash, repair bay, etc.so one can carry the load when another falters, but more importantly to his mentality when it comes to his entire portfolio.
You have to be a businessman, not just someone's franchisee, he said. A lot of times the oil companies do change philosophies and the way they do business. There might be a point where they're not allowing you to make a decent return on your investment.
Tomorrow, CSP Daily News unveils just where these strategy changes are opening up opportunities for jobbers and retailers.
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