PHILADELPHIA -- Red-and-white Lukoil gas stations are replacing Mobil stations in the Philadelphia area, reported the Philadelphia Inquirer.
The Russian company has already converted about 80 Mobil stations in the area and is remodeling nine a week at a cost of up to $50,000 apiece, according to the report.
"I bet you the average person doesn't have any clue about Lukoil," Professor Stephen Hoch, chairman of the marketing department at the University of Pennsylvania's Wharton School of Business, told the newspaper. "It clearly [image-nocss] suggests they're making a commitment to retail."
Delaware County resident Irma Sitkoff was puzzled at first when she started seeing Lukoil stations, and then shocked to see recently that the Mobil station in Woodlyn where she normally buys gas had changed overnight.
Sitkoff said she was not sure whether she would keep buying gas there, because she liked using her Mobil Speedpass, a small gadget that let her quickly charge gas purchases to a credit card. "But it's a convenient place to get gas," she told the paper.
Lukoil's emergence in gasoline retailing has a couple of longer-term goals, the report said. "You have to invest a lot of money, and you have to have brand recognition," Oppenheimer & Co. analyst Fadel Gheit told the Inquirer. "They didn't want to come here for the sake of making money. They came here for the purpose of having a Russian presence."
Lukoil spokesperson Joe Schwirtz told the paper that the company wanted to be seen as what it is: a major international oil company. But at the same time, it is not pitching itself in ads as a major energy power. There, the theme "we love cars" is meant to convey the fact that "Lukoil is here to fuel cars," he said.
Lukoil, which is Russia's largest oil producer, ultimately would like to become a more significant supplier of oil to U.S. refiners, he added. Right now, Europe is the main customer for Russia's oil, but China is also angling for its neighbor's petroleum.
The company is entering gasoline retailing at a time when most major oil companies are limiting their exposure to it by keeping only their best sites, and private brands, such as Riggins and Liberty, are growing, he said.
For gasoline consumers, added Hoch, brand loyalty is something that has largely faded along with gasoline cardsonce the only form of plastic accepted for a fillup. Price and convenience tend to dictate purchases in the largely impersonal retail gasoline market, he said.
Lukoil entered the U.S. market five years ago with its purchase of Getty Petroleum Marketing Corp. and its 1,300 stations on the East Coast.
Last year, Lukoil bought more than 750 Mobil stations in New Jersey and Pennsylvania from ConocoPhillips for $266 million. The stations had been cut loose from Exxon Mobil Corp. in 2000 to satisfy antitrust concerns. Lukoil does not own all the sites. It supplies about 470 under contract with independent dealers.
Ken Morrison, an independent dealer who began operating 25 Mobil stations in the Philadelphia area a year ago, told the paper that sales at his converted stations had come back to normal after a couple of weeks. "We've been very happy with the whole change," he said. He estimated that each of his stations served between 30,000 and 40,000 customers a month.
But changing from Mobil to Lukoil is not an easy move for some station owners, said the report. American Auto Wash Inc., which operates 18 stations in the Philadelphia area, does not want to convert its five Mobil stations to Lukoil. Kevin S. Kan, president and CEO of the Malvern, Pa., company, said Lukoil was charging dealers as if it were a major brand, even though it is not. "Why pay more for a brand that is not well-known?" he asked.
Instead of switching to Lukoil, American Auto Wash is launching its own brand in October, Kan told the paper. American Auto Wash also operates 13 stations under the BP brand.
Hoch said he could understand the reluctance. "If I was an independent Mobil gas station owner, I would think Mobil has more brand equity than Lukoil," he told the Inquirer. "I just can't see how it would help."
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