Fuels 50 2018: Gas Guzzlers

CSP's second annual Fuels 50 ranking shows which brands are winning the battle for market share

CHICAGO -- A large, welcoming c-store, sophisticated foodservice and loyalty galore: When it comes to why some brands are moving the most gallons, it’s often about anything but the fuel.

Case in point are the chains leading CSP’s 2018 Fuels 50 ranking of the most effective fuel brands in the United States. Created in partnership with Oil Price Information Service (OPIS), Gaithersburg, Md., the list ranks fuel brands by market efficiency, which OPIS calculates by dividing a brand’s market share by its outlet share. Brands with a higher market efficiency have higher per-store fuel volumes.

Take Kum & Go. It had a market efficiency of 2.34 in this year’s Fuels 50, more than double the national average, according to OPIS figures. And it landed in the No. 12 spot, up from No. 24 the previous year. Matt Spackman, vice president of fuels for Kum & Go LC, West Des Moines, Iowa, which has more than 400 stores in 11 states, partly credits the chain’s new, 6,200-square-foot Marketplace concept for its ability to grab more fuel gallons. The stores showcase the retailer’s made-to-order sandwich offer, as well as plenty of seating. A modern fuel canopy ties into the store design, and large signage at the pumps highlight the food offer within. Topping it off is a strong, digital-first loyalty program.

“Customers are more interested in the fueling experience than the fuel itself,” says Spackman. “We want to provide a great fueling experience and think the assets provide that.”

Privately Owned Excels

Topping the Fuels 50 list for the second year in a row is Buc-ee’s, which had a market efficiency of 9.13 in 2017. Retailer Buc-ee’s Ltd., Lake Jackson, Texas, has more than 30 sites in Texas and is known for building more than 50,000-square-foot stores behind forecourts that feature dozens of dispensers. It recently won a Guinness World Record for having the longest car wash in the world—a 255-foot behemoth—and is working on what would be the biggest c-store in the state of Florida, its most recent market for expansion.

Besides the Texas-size c-stores, Buc-ee’s has another lure to draw in customers: It priced gasoline 10.34 cents per gallon (CPG) below the market competition in 2017. This makes it a bit of an outlier among the top Fuels 50 brands, which are all competitive on price but are far from this double-digit negative price differential, which is more common among hypermarkets.

The power of low prices is undeniable. In a February 2018 survey of GasBuddy app users, more than 88% said the price of fuel was the reason why they chose a particular location to fuel up (see “Fuel Factors” infographic).

Tom Kloza, global head of energy analysis for OPIS, describes Buc-ee’s as a bit of an enigma.

“The question everybody has is, ‘Are the superstations very profitable?’ ” Kloza says. (Bucee’s declined comment for this story.) “They say, ‘We wouldn’t be building them if they weren’t.’ You have to wonder … do you get enough kick from inside items—and they probably have more SKUs than anybody—to make up for selling 10 cents below the average competition?”

“Once you can get them on the lot, one of the lowest hurdles we see is getting them to come in and buy a drink." —Mike Lorenz, Sheetz

The rest of the top 10 brands are a collection of familiar faces. Wawa, the typical leader of OPIS’ annual market-efficiency rankings of chains with 50 or more sites, took the No. 2 spot, followed by QuikTrip, Sheetz, RaceTrac, QuickChek, Royal Farms, Maverik, Spinx and Love’s.

“The private companies … are out way beyond what you’re getting from public companies or the brands associated with the big refiners,” Kloza says.

Privately owned Wawa, with more than 700 sites in six states, acts like an integrated energy company, especially in the steps it has taken to compete in Florida. Take, for example, its purchase of a barge in 2017 to deliver fuel to its more than 100 Florida sites.

“Over the past year, Wawa has worked to evolve both our fuel supply network and retail offer to adapt to the changing landscape around us,” Brian Schaller, senior vice president and chief real estate and fuel officer for Wawa Inc., Wawa, Pa., told CSP in late 2017. “With Wawa’s continued growth in the state of Florida—one with no refinery capacity or meaningful pipeline infrastructure—Wawa has made a long-term commitment to an articulated tug and barge (ATB) to help us supply our stores in the state.”

But there’s more that draws customers to Wawa sites than stable gasoline supply. Also earning customers’ fuel business is the newest iteration of Wawa stores, which span up to 7,600 square feet and feature the retailer’s famous made-to-order hoagies.

The Major-Oil Factor

Major oil brands dominate U.S. market share, with eight of the top 10 fuel brands owned either by an oil company or refiner. (Click here to see “Top 10 Fuel Brands by Market Share”) The Shell brand led with 12.86% share in 2017. (OPIS determines market share and volumes based on Wright Express (WEX) fleet-card transaction data, which OPIS considers an accurate proxy for a fuel brand’s total gallons.)

Even here, however, a private brand—QuikTrip—makes an appearance.

The Tulsa, Okla.-based retailer has the distinction of not only placing among the top Fuels 50 brands with a 4.66 market efficiency, but it also ranked among the top 10 fuel brands by market share, with 3.22% of national fuel gallons in 2017, according to OPIS.

That’s no small feat for a fuel retailer that does not have the same supply advantages as a refiner-marketer, or the massive footprint of Alimentation Couche-Tard’s Circle K brand, which ranked third.

“We hope that we continue to execute and be consistent with the offer,” says Mike Thornbrugh, manager of public and government affairs for QuikTrip Corp. “What that means is being highly competitive with regard to pricing. Make it easy for customers to get on and off the lot.” He also credits QuikTrip’s fuel quality, backed by both its guarantee and certification to the Top Tier fuel-detergent standard, as well as clean and safe forecourts and well-maintained equipment. According to the GasBuddy survey, the most popular reasons for choosing a fueling location after price was fuel quality and site cleanliness.

Costco's Carrot

Speaking of gallons, a few brands not appearing in the Fuels 50 ranking are among the highest-volume fuel retailers in the business: hypermarkets such as Costco, which do not accept WEX cards and therefore are not captured in the data. (Also not fully captured: brands with small or no fleet sales, such as Murphy USA’s Murphy Express).

Costco, Issaquah, Wash., had the second-largest negative price differential among the fuel brands tracked by OPIS, with its typical fuel site selling gasoline for 21.19 cents below its direct competition on a typical day in 2017.

“Costco is magical,” says Kloza. “Every time they look at new property in North America where they want to put up a new Costco, they want to put gasoline in there because that’s the magic carrot that draws everyone inside to the big box so you can buy 80 gallons of mayonnaise.”

While Costco does not report gallon figures, their volumes can range from 700,000 to 1 million gallons  per month, Kloza says.

The greatest negative price differential was supplied by Kroger Co.’s Food 4 Less fuel brand, which narrowly edged out Costco, last year’s ranking’s low-price leader. Kroger had two other fuel brands among the 10 low-price leaders: supercenter brand Fred Meyer and c-store brand Quik Stop, which it sold, along with the rest of its c-store assets, to U.K.-based EG Group. (Kroger declined comment for this story.)

Trends and Loyalty

Beyond the high market efficiencies, there are a few noteworthy trends among the top Fuels 50 brands.

“If you’re looking at the top 25 or so, pretty much everybody on the list has done new-to-industry builds,” says Kloza of OPIS. “So they must be getting bang for their buck.” This includes Pilot Flying J, whose Pilot and Flying J brands both appeared in the top 25. In 2017, Warren Buffett’s Berkshire Hathaway acquired a 38.6% partnership interest in the Knoxville, Tenn.-based chain of more than 750 truckstops.

“Everything we hear is that they’re going to look to get more critical mass,” says Kloza. “Now that they have an incredible access to capital through Berkshire Hathaway … we’re going to see a much bigger Pilot a few years from now—and maybe it will include some acquisitions and new-to-industry builds.”

Loyalty programs and/or branded credit cards offering fuel savings are the norm for most of the Fuels 50 brands. The GasBuddy survey found millennial consumers especially tuned in to loyalty programs, with 36% of 18- to 34-year-olds saying such offerings guide their fuel brand choice, vs. only 23% of 55- to 64-year-olds.

Mike Lorenz, executive vice president of petroleum supply for Sheetz Inc., Altoona, Pa., says location and price are the biggest drivers of fuel sales, and loyalty is a key piece tying the forecourt to the store.

“Once you can get them on the lot, one of the lowest hurdles we see is getting them to come in and buy a drink,” he says. “Then we try to build from there.”

Sheetz’s MySheetz loyalty program offers all members 3 cents per gallon off fuel purchases. Customers then build up “pointz” for every dollar spent in the store, which they can redeem on beverages or snacks. “[You] try things, like things, you try to build points and then you redeem those points,” says Lorenz. “It’s kind of that evolution.”

Many of the leading fuel brands are also remarkably willing to test their potential beyond gasoline. For example, a few have opened fuel-free, urban formats, including Sheetz, QuikTrip, Maverik and Wawa.

Seven of the top 10 fuel brands belong to chains that have added electric-vehicle (EV) charging stations: Wawa, Sheetz, QuickChek, Royal Farms, Maverik, Spinx and Love’s. Wawa is ramping up its partnership with EV manufacturer Tesla over the coming 18 months. So is Kum & Go, which hosted its first Tesla Supercharger at its Sherburn, Minn., store in late 2017, and plans to add three more this year.

It’s an attitude that suggests these retailers’ fuel prowess is more a reflection of their innovative spirit and adaptability than an inherent passion for pushing petroleum.

“We realize that demand is going to flatten,” says Spackman of Kum & Go. “We’ve all enjoyed that last little bit where we’ve seen an uptick, but we recognize it will be temporary. So the challenge becomes: What’s next?”

Next: Top 10 Brands by Market Share

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