Big Pump?

7-Eleven reviewing gasoline supply agreement with CITGO; could create own brand

DALLAS -- 7-Eleven Inc. CEO Jim Keyes told shareholders Wednesday that a decision is pending about what brand of gasoline its pumps will sell after the chain's 20-year supply agreement with CITGO Petroleum Corp. expires in September 2006, reported The Dallas Morning News.

The company has talked to all the major oil companies and has tested cobranding with ChevronTexaco Corp. since 2003 at 20 locations in Texas, Florida and California. It could sign a new supply agreement with CITGO, Keyes said. But he told the newspaper that 7-Eleven could create its [image-nocss] own brand of gasoline.

It's safe to say we've talked to everyonemajors and independents. We can either partner with a major oil company, be an anchor for an independent the way we've been with CITGO or maybe create our own brand, Keyes said.

There are tradeoffs with either strategy, he added. We can charge higher retail prices for a major oil company brand, but costs are lower for unbranded gasoline.

With its Big Eats, Big Bite and Big Gulp, 7-Eleven has a track record of branding commodities, said the report. Our preference is to reach for the highest quality no matter what the product, Keyes said. Our attention on the retail gasoline business has lagged behind the inside of the store.

Gasoline represents one-third of 7-Eleven's revenue, said the report. It sells gasoline at about 2,500 of its 5,800 U.S. and Canadian locations.

Keyes declined to talk specifically with The Morning News about the ChevronTexaco test started in June 2003 with 11 7-Eleven store selling Chevron gasoline and nine Chevron convenience stores converted to the 7-Eleven format. Calls to ChevronTexaco and CITGO by the paper were not returned, either.

Last year, 7-Eleven's gasoline margin of 15.3 cents-a-gallon beat the industry average of 12.7 cents, the report said, citing National Association of Convenience Stores (NACS) data. Its gasoline sales last year totaled $4.2 billion. It sold 2.2 billion gallons in 2004, up 6.4% from the prior year.