ORLANDO, Fla. – With demand flattening and disruptive forces emerging, the business of selling gasoline and diesel is not getting easier. But as CSP’s2019 Fuels 50 ranking of the most efficient fuel brands shows, there are multiple levers to pull in gaining gallons.
In a panel at the recent 2019 Convenience Retailing University in Orlando, Fla., Samantha Oller, managing editor of CSP, moderated a panel that included Tom Kloza, global head of energy analysis for Oil Price Information Service (OPIS), Gaithersburg, Md.; Michael Lorenz, executive vice president for petroleum supply for Sheetz Inc., Altoona, Pa.; Brian Trout, vice president of operations for GPM Investments LLC, Richmond, Va.; and Norman Turiano, principal of Turiano Strategic Consulting LLC, Cape Coral, Fla.
The group hashed through everything from the strengths of the most efficient brands to selecting sites. Here are five highlights from the conversation ...
On the traits of the most efficient fuel brands
Tom Kloza, OPIS: “Wawa and Sheetz and QuikTrip … they prove that you don’t have to have a major flag to have a really successful brand. And that’s true with Costco as well. The other thing I’d say that you’ll find in the data is that a preponderance of the most efficient locations tend to be in Eastern, Southeastern and Midwestern markets. You don’t see it in the Rocky Mountains or on the U.S. West Coast. Now, the other side of that is that in 2018, the West Coast and the Rocky Mountains were by far the most profitable markets out there. Just incredible, incredible differences between what you can buy at wholesale and what you sell it at for retail.”
On the role of fuel price
Michael Lorenz, Sheetz: “We get enamored with the shiny object, but when it comes to selling gas, the two main reasons why people choose where to buy gas is price and location. If you’ve got a bad location, there is nothing you’re going to do to sell gas there. It’s that simple. And we’ve picked some bad locations—trust me.
"The other kicker is facilities. We survey our customers. What they say they like us for the most is we’re a one-stop shop, so it’s more than just the gas. It’s the food. It’s stopping for the restrooms. It’s the total offer.
"The consumer is highly sensitive to gas prices, but you don’t necessarily have to be the cheapest one out there. You start degrading your brand if you’re always the cheapest. It really is picking who your competitors are and pricing against those—not necessarily the lowest person in the market, but who we are going to compete with and picking those battles.”
On the chasing of gallons
Norman Turiano, Turiano Strategic Consulting: “The success is the overall package in terms of the site. Is it designed to be sexy? Is it well-lit? Is it open? In other words, does it give the attributes of feeling safe when you’re there?
"No. 2, pricing is critical. It’s the only product in America whose price is in big, bold LED letters sitting on the corners for you to see. So Americans, as a result, feel very passionate about that price. But the trick is not just being the low-price leader, because you again leave money on the table.
"There’s only so many gallons available in any given market. If your goal is to get gallons, you need to put it where the gallons are. If your goal is to have an overall site profitability, then you’re OK with maybe doing less than your average gallons for most of the things you see up there. Because at the end of the day, we don’t eat gallons. We take home gross profits.”
On a site’s ‘natural’ fuel volumes
Brian Trout, GPM Investments: “Through acquisitions, different formats, sizes, there’s very little consistency in there, so you’ve got to find the sweet spot for these different asset classes that can compete against some of these larger, big-format facilities that can do [400,000 to 600,000] gallons a month and accommodate that kind of traffic. These smaller-footprint stores, you have to figure out where you can fit within the framework of the marketplace. And I think since major oil got out of retail, there’s been a bit of a stabilization in the pricing behaviors in the marketplace, which has allowed some of these smaller operators to exist in a more profitable manner than they were when major oil was driving throughput all to serve the refinery capacity.”
On picking locations and the ‘golden gut’
Michael Lorenz, Sheetz: “You can do all the analytics in the world, but in the end, there’s that ‘golden gut.’ It’s just hard to replace that intuition. Because it’s not like [Sheetz’s site-selection professionals] are not data-driven—it’s just that they’re processing all that stuff in their head that they’ve seen for years and coming out with, ‘Yeah, this is a great site.’ ”
For more from the panel, see the May issue of CSP magazine.