Diamond Oil Takes Shine to Kwik King

Following 8-store purchase, Florida marketer sets sights on further expansion

Steve Dwyer, CSP Reporter

OCALA, Fla. -- Diamond Oil LLC announced Monday the purchase of eight Kwik King Food Stores in Ocala, Fla. Within the terms of the all-cash deal that closed January 4, Diamond Oil also has agreed to supply fuel products to an additional 11 Kwik King locations throughout central Florida, units which were acquired by a local entrepreneur in a separate deal.

As reported in a CSP Daily News Flash yesterday, all 19 stores will be re-imaged from Shell to the unbranded Diamond Oil banner.

Kwik King, which at one time held 50 Florida-based [image-nocss] locations, is poised to sell the remaining 24 stores in its possession, hopefully by the end of first-quarter 2008, Bill Tuck, president of Kwik King, told CSP Daily News. Tuck said he and his partner, Ralph Presley, had an agreement in place last November to sell the entire company to a single acquirer, but the deal fell through. Tuck said the two partners then opted to parcel out the company in four unique "clusters" ranging in size from six to 22 stores.

In the meantime, Diamond Oil has ambitious plans for the Kwik King stores, Jay Patel, Diamond Oil's CEO, told CSP Daily News. "We surveyed these retail units, and selected eight locations we believed represent the best potential for growth. They are all high-traffic units that sit on prime real estate, and this will enable us to significantly enhance fuel and inside sales," said Patel.

Patel said converting units from branded to the Diamond Oil proprietary mark enables his retail units to compete on equal footing with the larger fuel providers in the local market. "Every day on my way to work, I pass a Kroger and a Home Depot, both selling a lot of fuel," he said.

"Our success with both our own stores and our dealers continues to validate our profit enhancement strategy," said Patel. "Pricing continues to be the determinant factor in driving volume. By providing dealers with competitively price unbranded fuel, we have, in many cases, been able to increase their fuel sales four times higher per month."

He added, "Most dealers are ecstatic when they consider doing that kind of increase in fuel sales, but the real issue to consider is the effect that kind of jump in fuel volume has on in-store salesthat's where Diamond provides the extra assistance to our dealers. To compete in this market, you have got to get the customer to the pump. To succeed, you've got to get them in the store."

Including its new units, Diamond Oil now has a total of 65 owned and operated stations in its arsenal, with the majority flying the Diamond Oil flag, as well as a handful branded Shell.

The eight Kwik King locations, which range in size from 2,400 to 3,200 sq. ft., have composite fuel throughput of 500,000 gallons per month (on average about 60,000 gal./mo. per store), and per-store inside sales ranging from $60,000 to $75,000 a month, said Patel. On the fuel side, the executive said he plans to refurbish all eight units with new fuel canopies, islands and dispensers. He also plans to remodel store interiors.

The 11 Kwik King stores to which Diamond plans to distribute fuel have composite fuel throughout of 900,000 gal./mo., and these locations also will be fitted with new canopies, islands, dispensers and inside refurbishing, Patel added. The new owner of these locations plans to rebrand the units under the Diamond Oil trademark.

Patel said that Diamond Oil is likely to engage in additional retail expansion in 2008 and, to that end, the company is looking closely at acquiring a handful of locations in and around Valdosta, Ga. Under its acquisition strategy, Patel said the firm will always seek to rebrand units under its Diamond Oil logo where applicable, but will also retain major or independent flags when necessary.

Tuck and Presley, who bought Kwik King Food Stores in 1998, plan to exit the retail environment once the remaining 24 locations are sold. Tuck said Diamond Oilin addition to having the capital to fund the purchasealso possesses a knack for enhancing retail locations. "Diamond has the ability to be much more of a hands-on owner, which will play a huge role in their success," said Tuck. "We basically had a 'cookie-cutter' mentality surrounding these stores. Diamond will personalize them to a larger degree."

The stores were once outfitted with hot deli programs, which eventually went by the wayside in favor of branded foods, such as Papa John's pizza, said Tuck. Patel said that as part of the renovation of the eight Kwik King stores, Diamond Oil is eager to reinstitute fresh deli programs.