NEW YORK -- In the annals of major corporate mistakes, two that rank close to the top involved British companies that misread the U.S. market: Tesco with its now defunct Fresh & Easy retail program, which I estimate ultimately cost the retailer as much as $4 billion, and BP’s decision to abandon the Amoco gasoline brand in the United States in favor of the far less-known and less-respected BP brand, the cost of which is impossible to estimate.
I have written at length about the Tesco debacle, so I will not mention it further here. While I have also written previously about BP’s mistake, the recent announcement of the company’s plan to reintroduce the Amoco brand in the United States is interesting in several respects—particularly in what it doesn’t tell us.
In August 2010, I suggested that the BP brand had been so badly damaged by the Deepwater Horizon disaster that BP should replace it with Amoco. I also made the point that it had been a mistake for BP management to abandon Amoco in favor of BP in the first place.
My column drew a lot of reader response—pro and con—so, in a follow-up piece, I wrote: “The bottom line is that, in the United States, BP is in a position that, to my knowledge, no other damaged brand has ever enjoyed. They own another brand—Amoco—that is, arguably, better than the one that is damaged. It seems to me that, whatever it would cost BP corporate to switch from BP to Amoco in the United States—and fully cover all dealer costs to do so—would be a less expensive, quicker and surer solution than trying to repair the long-term damage that has already been done to the BP brand.”
Seven years later, the effects of Deepwater Horizon have been mitigated, eliminating any urgent need to change from BP to Amoco.
So the fact that, 18 years after they abandoned Amoco (at the time the most-respected quality gasoline brand in the United States), BP’s research shows that the brand still has enough appeal for them to reintroduce it as a second brand option for their dealers demonstrates that the company’s new management implicitly recognizes the serious mistake that the previous management made.
But the fact that the oil giant continues to consider BP as its main U.S. brand for future development, rather than putting a stronger focus on Amoco from now on, most likely signals a reluctance to recognize that, even now, Amoco may have more sales appeal than BP. However, it could also reflect a wish by BP management to review research on the comparative strengths of the two brands, after Amoco has been relaunched, before making a final determination.
One thing is certain, reestablishing Amoco as a major gasoline brand will require significant market density in each market where it is sold, and it is difficult to see how this could be achieved by placing it only at BP dealers’ competitive sites. So this raises the question of whether BP is serious about redeveloping Amoco as a strong brand or just intends to use it opportunistically as a second option.
Then there is the question of whether BP intends to pursue a true convenience-store program for Amoco. The corporation’s Oct. 10 press release shows an Amoco site with a “to go” brand c-store. As I pointed out in my May 2014 column “BP’s ‘to go’ Concept a Step Back in Time,” “to go” is not really a brand; it is a signage program to identify whatever convenience store happens to be at a given BP site. However, in its announcement, BP also talks about its “strategic partnerships with Marks and Spencer in the U.K. and REWE in Germany.” These are BP convenience stores in those markets that have food sections (largely prepared foods) supplied by their major supermarket strategic partners. Some time ago I heard through the grapevine that BP was seeking such a strategic supermarket partner in the United States.
Rick Altizer announced the Amoco reintroduction. He joined BP in January as senior vice president of sales and marketing for BP Fuels North America, after leading restaurant concepts and serving as chief brand officer for Mapco Express, as well as heading retail marketing for Shell. Thus, it is fair to assume that BP has some continuing interest in developing a true convenience-store program. (It sold the ARCO program and has long since abandoned BP Connect, as well as Amoco’s Split Second.) So, because they are also looking for new gasoline sites, I have been wondering whether BP should be added to the list of contenders for the Kroger convenience-store division. It is the 20th largest c-store chain in the United States, consisting of 784 stores, all but 58 with gas, and spread over 18 states.
If Kroger decides to sell its convenience stores, this will present a once-in-a-lifetime opportunity for a buyer not currently heavily in the business to become a major player in the U.S. c-store market overnight. BP may be the only such company with both the desire and the resources to do that.
In addition to providing BP with the U.S. growth in gasoline that it seeks—and a path to expanding the Amoco brand—the stores could also provide the company with the U.S. supermarket partner it has been seeking to introduce the type of programs it has been successful with in the United Kingdom and Germany, which I feel is long overdue here in the United States.
So … too little, too late? Or could this be the start of something big? Only time (and BP) will tell.
What do you think? Email me at the address below with your thoughts.
Gerald Lewis is a semi-retired consultant who has served more than 300 convenience and oil companies at board level on five continents for more than 40 years. He can be reached at 646 215-7741 or [email protected]