Chevron gave J.H. Reaben Oil Co. and its 10 stores six months to remove its Texaco flag and rebrand, after announcing its pullout from North Carolina late last year.
“We were Texaco for 80 years,” says Beau Waddell, vice president of the Hendersonville, N.C., chain, citing how San Ramon, Calif.-based Chevron had purchased the name a decade ago. “We had an emotional attachment to the Texaco brand.”
That said, Waddell thinks the transition to Houston-based Marathon Oil Corp. was successful. “We were pleasantly surprised that there has not been a great decrease in gallons going from one to the other,” he says. “And it has not affected inside sales.”
For Reaben Oil and other chains rebranding because of a major-oil retrenchment or from an internal business decision, the process involves foresight and patience. From obtaining contractor estimates to educating customers, rebranding is a project with many moving parts.
Some points to consider:
- Contractor decisions. Operators have to bid out the work, finding local contractors with enough experience specific to gasoline stations to do a good job at a competitive price.
- Think inside the box.Rebranding often means switching credit-card networks, creating the need to upgrade software and possibly hardware.
- Oil-company incentives. Each brand has its own package of incentives that may ease the financial burden of the switch.
- Educate customers. A big concern is how customers will respond to the change. A retailer may want to invest in local media campaigns to deliver consistent messages about the continuity of the business and upsides to the change.
What added to the stress of the Reaben Oil rebrand was time. “Some [marketers] switch on their own,” he says. “This wasn’t on our terms. We had to figure out what we were going to do, get the bids out … and a lot of [Chevron operators] were wanting the same resources.”
FOUNDATION OF TRUST
Nostalgia for the old brand aside, what concerns most retailers making the switch is the customers’ reaction. For Reaben Oil, that response overall has been positive. The company’s switch to the Marathon brand elicited favorable comments from customers.
“The Marathon colors are red, white and blue,” Waddell says. “It’s a patriotic look, so we had comments on that.”
Losing customers was a big fear for Maximo Alvarez, president of Sunshine Gasoline Distributors Inc., Doral, Fla. Five years ago, the Miami-area retailer made a business decision to switch to Chevron, which has named Florida as one of the states in which it intends to focus its retail efforts.
Alvarez relied on his company’s local roots to weather the change. In business since 1987, he says Sunshine Gasoline is well-known and involved in the community. “A lot of our customers [see us as] neighbors,” he says. “They get to know the people who run the stations and establish relationships. It’s neighbors serving neighbors.”
In his experience, volumes don’t have peaks and valleys. People get used to going to a particular location, he says, “As long as you continue maintaining retail fundamentals—you’re open the right hours, you’ve got competitive pricing and good service, a good image. … We were really not affected [by the brand change].”
In a few short years, Alvarez has grown his Chevron-branded business to about 150 sites that he owns and operates, along with another 200 that he supplies. “It’s the power of a major brand that has a tremendous customer base with its credit card,” he says. “That helps a lot and brings [us] an edge.”
Does Alvarez have any concerns about Chevron shifting gears and pulling out of Florida? “None whatsoever,” he says, citing how Chevron was “extremely good” at communicating its intentions during its last announced pullout. “They sat down and made tough decisions, but they made the right decisions. They want to continue where it makes sense. By being down here, we’re strategic and important to the Chevron people. It gives us a tremendous amount of confidence.”
THE REBRANDING PATH
For Waddell and Reaben Oil, Chevron’s decision threw a seven-month timetable into the equation. The company used the first two months to evaluate its options, examining supply availability, contract terms and which brand made the most sense in a corner- by-corner analysis. Execs decided on Marathon.
Once past the brand, the company had to bid out the physical conversion of canopies, pumps and signs, everything exterior. It also opted to bid the entire forecourt to a single company vs. bidding out parts, such as the canopy to one company and the pumps to another. It caused less confusion and was simply easier for Waddell. He found three companies to undergo the bidding process and eventually chose a South Carolina firm that had experience in such conversions.
The larger challenge was inside the store, having to switch point-of-sale (POS) software to go from Chevron to Marathon. The stores’ POS device needed a new program written to allow for the Marathon hookup. Waddell says the company was lucky in that there was enough demand for the software upgrade from other operators to justify the supplier’s efforts.
The whole rebranding process took about a week per store and did not require a store shut-down.
As for customer education, stores advertised to let the public know that the same company was operating the locations. “It’s the same people in the stores, the same employees,” Waddell says. Reaben Oil invested in billboard, radio and newspaper advertising, using an outside firm to come up with the overall package.
Looking back, he says more time would have helped. “The more time you have, the better,” he says. “If you’re thinking of switching on your own, take your time and talk to as many people as possible. Then once you make that decision, there are so many people looking for work [that you’ll have options].”
MUSICAL CHAIRS
Waddell would certainly not wish such a sudden and drastic change on others, but his situation and the scale with which it occurred appear unusual. By far the most significant oil-company pullout in recent months—possibly years—has been the Chevron move, which affected 13 states and 1,100 locations. The decision came after an internal study of the oil company’s operations worldwide, resulting in an effort to better align its vertical operations.
“We’re always looking at our business,” said a spokesperson back in December when Chevron first made the announcement. “Globally, we’ve made divestments in certain areas and acquisitions in others. It depends on how it plays to our strengths.”
To fill the void, brands such as Shell and Gulf have stepped up. In Elkins, W.Va., Woodford Oil Co. signed on with Houston-based Shell Oil Products to rebrand its 74 Chevron and Texaco stations. Officials with Framingham, Mass.- based Gulf say the brand-expansion effort has skyrocketed from about 100 annually to a projected 400 for 2010.
Chevron’s pullout sparked Gulf’s growth spurt on two levels, one with distributors and retailers needing to rebrand and the other with territory and branduse rights, says Rick Dery, senior vice president of branded sales and chief marketing officer for Gulf Oil. Gulf had the rights to use its brand in only an 11-state marketing area; that was until last January, when it lobbied for and attained the rights to push the name nationally.
The Chevron pullout kept Gulf focused on affected markets, from Maryland down to South Carolina and west into Tennessee and Kentucky. But by the end of the year, it will have gone from 11 states to 22. In addition, Gulf is making moves in eight more states, including Wisconsin, Illinois, Indiana, Michigan, Mississippi, Alabama, Louisiana and Texas. “[Distributors and retailers] like to see people supporting the brand and not pulling out of markets, cutting back on staff or changing strategies, as far as the brand goes,” Dery says. Yet another factor fueling its rebranding efforts are the misfortunes of London-based BP. The catastrophic oil spill off the Gulf of Mexico this past spring has created a significant public outcry against the brand, which has had its effect on volumes, retailers say. Dery says that despite BP being able to eventually stop the leak, he fields multiple calls a day from folks inquiring about rebranding.
THE OFFER
Rebranding a location’s fuel is no small feat, so the reasons for switching must be compelling.
Vera Haskins, president of the nonprofit Petroleum Marketers Oil Co., which operates the fuel brand Spirit out of New Hope, Pa., says beyond being forced to rebrand, people do so typically because they’re unhappy with their supplier, be it for financial or image-related reasons.
“But the most common reason we hear is that they’re looking for a change,” Haskins says, pointing out that a rebrand sometimes works to improve the curb appeal of a site. “Then, in some cases, the biggest consideration is profitability.”
For those hunting for a new brand, different suppliers have different requirements, having to do with volume and image. Waddell of Reaben Oil says some brands require items such as back-lit canopies or digital signs. Unfortunately, he says, some locations don’t warrant the added expense.
Gulf places volume requirements of 10 million gallons a year. Taken another way, it’s supplying 14 to 15 sites, with each needing to generate at least 60,000 to 65,000 gallons a month, Dery says. For marketers who don’t have those volumes, he points to the company’s Wave brand, Gulf’s “value” option. It debuted in 2008 and has about 100 sites in the field.
Contract specifics also vary. Dery says Gulf offers both a rack price with the appropriate discount as well as “index deals,” wherein prices are tied to services such as Platts or Argus. Gulf can even offer a “fusion” program, he says, by which a distributor can have a little of both.
Different companies also offer different incentives and financial-assistance packages. These range from nothing to covering all upfront expenses. Typically, incentives come in the form of rebates or loans amortized over time.
“It’s a given that we have to spend ‘X’ amount,” Alvarez of Sunshine Oil says. “But the oil companies have different programs to help us with branding.”
NO NOSTALGIA LEFT?
What’s left after the dollars and cents of a rebrand? The intangible: those unique, emotional ties to a particular name. Jan Vineyard, president of the West Virginia Oil Marketers and Grocers Association (OMEGA), Charleston, Va., says the initial reaction to Chevron pulling out of her state was shock. “I had lunch with a member whose company had been with Chevron for 60 years,” she says.
Haskins of the Spirit brand agrees. “I had a gentleman from western Pennsylvania whose father had never gotten over Mobil pulling out of his area,” she says. “It’s because the brand [representative] would come over for Sunday dinner.”
Both Vineyard and Haskins agree that the days of Sunday dinners are gone. Fewer reps in the field mean relationships happen over the phone, and the end of the era of the oneflag marketer. Operators today either carry multiple brands or go unbranded, promoting the name of their c-store chain. Still, all nostalgia aside, Dery of Gulf believes the future of fuel brands lies in taking a step back. Establishing relationships and building face-to-face ties directly with distributors will become the differentiator. “Branding decisions will begin and end with the people behind the company marketing the brand,” he says.
Recent Pullouts
Typically for reasons of supply efficiency, major brands periodically decide to pull out of certain markets and regions. Here’s a list of recent activity.
Chevron, Texaco: San Ramon, Calif.- based Chevron, which also owns the Texaco brand, announced a pullout late last year that included Delaware, Indiana, Kentucky, North Carolina, New Jersey, Maryland, Ohio, Pennsylvania, South Carolina, Virginia, West Virginia, Washington, D.C., and parts of Tennessee. Approximately 1,100 independently owned and operated retail stations were earmarked for removal of the brands.
BP: Prior to the catastrophic oil spill off the Gulf of Mexico last spring, BP had announced plans to stop branded-fuel supply in central Pennsylvania, including Altoona, Harrisburg, Mechanicsburg, Northumberland, Sinking Spring and Wilkes-Barre.
Rebranding Numbers
Major-oil pullouts and other market conditions are forcing many fuel distributors and retailers to rebrand. Here are a few numbers to consider:
$20,000 to $75,000 Cost range for an image changeover, factoring in canopy, pump and signage requirement 1,100 The number of stations affected by Chevron’s pullout from 12 states and parts of Tennessee
100 Number of stores Gulf Oil has signed on annually since 2005
400 Number of stores Gulf projects to convert in 2010, after attaining brand rights and taking advantage of Chevron’s recent pullouts
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