FINDLAY, Ohio -- Speedway and Marathon will be Marathon Petroleum Corp.’s predominant retail and wholesale brands, respectively, following the company's merger with fellow refiner-marketer Andeavor, Chairman and CEO Gary Heminger said on the company’s third-quarter 2018 earnings call.
- Marathon Petroleum's Speedway is No. 3 on CSP's 2018 Top 202 ranking of convenience-store chains by number of company-owned retail outlets.
He and his executive team discussed the progress on the conversion process and provided insights into their branding strategy.
Here are some highlights from the Nov. 1 call …
1. Andeavor c-store conversions
Marathon Petroleum closed on its $23.3 billion acquisition of San Antonio-based Andeavor in early October.
Marathon Petroleum has begun the process of converting the Andeavor company-owned and -operated convenience stores, including its SuperAmerica locations, to the Speedway brand.
Since the closing of the transaction on Oct. 1, Marathon Petroleum has converted approximately 90 sites in the St. Paul and Minneapolis markets, and the company said it expects to complete the conversion of approximately 200 sites by the end of 2018.
“Both sets of shareholders demonstrated overwhelming support as we are now the leading integrated downstream energy company in the U.S. Over the first few months, our teams will be diligently working on integrating the business, deploying the best practices and aligning the cultures,” said Heminger. “We are already harvesting synergies and plan to report on our progress regularly, starting in 2019.”
“These conversions are an important element in the synergy capture we are driving,” said Donald Templin, president of Marathon Petroleum. “We are learning each day, implementing the best practices from each organization, and while the conversions of the Speedway stores are an easy first milestone to point out, we look forward to providing more updates across our refining, midstream and retail organizations at our upcoming Investor Day.”
2. SuperAmerica rebranding
Heminger also offered details on the company’s branding strategy moving forward.
“We're already completing the turnaround of the St. Paul, Minn., and Wisconsin assets from SuperAmerica into Speedway,” he said. “We expect that to be done by the end of the year. From there, we have crews doing seven to eight stores every day. We're able to turn those stores that quick.”
He said that speed involves more than “just putting signs out on the pumps and at the street.” He said it also includes re-merchandising the store and updating backroom systems. “Speedway has a very strong brand and a very strong convenience-store merchandising component,” he said.
“We'll get those completed here in December, and then we're going to move to the West and Southwest and start probably in the El Paso and Arizona market, starting to rebrand those [c-stores] into Speedway,” Heminger said.
3. Arco, other rebranding
Heminger also discussed the Arco brand. “As we go out to Southern California, Northern California, the Arco brand is a very, very strong brand,” he said. “We're continuing our analysis. We won't have the crews freed up to be able to go further west until probably mid-2019 to later 2019. We're completing our analysis on what brands we may want to use in that market.”
“It is our intent that we're going to whittle this down to either one or maybe a handful of other brands and locations,” Heminger said.
Regarding the wholesale side of the business, “there are a large number of brands that have been used on the jobber dealer side in Andeavor in the past,” he said. “We expect to take the majority of those to the Marathon brand over time. It will take us a little while to finish up the analysis as we meet with some of our suppliers and as we meet with our customers as well to determine which brands, but the predominant brand going forward on that side of the business will be Marathon.”
4. E15 and RINs
Heminger downplayed plans to sell E15. He said the company continues to analyze whether to sell higher ethanol blends, including E15, at its retail sites in Minnesota. but will not make any decisions until the U.S. Environmental Protection Agency (EPA) finishes rulemaking that would allow the 15% ethanol blend to be sold year-round.
He also said he was heading to Washington, D.C., to “chat about” the Renewable Identification Number (RIN) market under the Renewable Fuel Standard (RFS).
- Click here for more details on Marathon Petroleum’s plans on E15 and RINs.
Marathon Petroleum Corp. reported 2018 third-quarter earnings of $737 million. Its income from operations was $1.40 billion in third-quarter 2018, compared with $1.58 billion in third-quarter 2017, driven by strong contributions from the midstream segment, offset by lower segment income from operations in the refining and marketing and Speedway segments. The refining and marketing segment income from operations was $666 million, compared with $1.1 billion in third-quarter 2017.
The Speedway segment income from operations was $161 million in the quarter, compared with $208 million in third-quarter 2017. The year-over-year decrease in segment results was primarily related to higher operating expenses and lower light product margins. Speedway's gasoline and distillate margin decreased to 16.51 cents per gallon in third-quarter 2018 compared with 17.72 cents per gallon in third-quarter 2017, due primarily to the effects of rising crude oil prices.
For the quarter, same-store merchandise sales increased by 4.9% and same-store gasoline sales volume decreased by 1.2% year over year. Expenses increased $28 million, due primarily to higher labor and benefits costs.
Findlay, Ohio-based Marathon Petroleum operates 16 refineries, and its marketing system includes approximately 7,800 branded locations across the United States, including approximately 5,600 Marathon-brand retail outlets. Its subsidiary, Enon, Ohio-based Speedway, owns and operates approximately 3,900 c-stores across the United States. It also owns the general partner and majority limited partner interests in two midstream companies, MPLX LP and Andeavor Logistics LP.