Fuels 50 2019: Retailers in the Fast Lane

CSP’s third annual brand ranking reveals the different paths to more gallons

CHICAGO -- In the quest to gain more fuel gallons in an environment of flattening demand, retailers have a few levers to pull.

There’s price, a core strategy for hypermarket operators such as Costco. The warehouse retail chain priced its fuel 22.62 cents per gallon (CPG) below its direct competition in 2018, according to Oil Price Information Service (OPIS)—and reportedly has fuel volumes that can range from 700,000 to 1 million gallons per month.

“There’s no question that that strategy is magical for Costco in the United States and Canada,” says Tom Kloza, global head of energy analysis for OPIS, Gaithersburg, Md. “They have a lot of places where they can be 20 cents below the competitive average and still be profitable. If your business plan is less about making a lot of money on fuel and more about making a lot of money on inside sales, like with Costco, you’re going to stand out.”

Location is the common No. 2 factor in gas-station choice, which is why major oil, by sheer number of branded locations, dominates in market share. The king of the hill here: Shell, which had more than 12% share of the U.S. fuel market in 2018, according to OPIS, thanks to its 14,000 branded locations.

Brand also has a role—although, depending on whom you speak to, its magic has shifted from the iconic Big Oil brands of the past to the “new era” privately owned independent c-store chains. Judging by the names leading CSP’s 2019 Fuels 50 ranking of the most effective gasoline brands in the United States, created in partnership with OPIS, brand strength is increasingly tied to large stores and a compelling foodservice offer—think fried chicken and hoagies—over a premium fuel offer.

The Fuels 50 list ranks brands by market efficiency, a metric that OPIS determines by dividing a brand’s market share by its outlet share. The top half of the list is dominated by brands such as Buc-ee’s, Wawa, Sheetz, RaceTrac, QuickChek, Royal Farms, Maverik and Spinx, which are perhaps better known nowadays for their expansive menus than their low gas prices, although many do price aggressively.

“Foodservice is magical for most of these companies,” says Kloza. He points to RaceTrac, which has greatly expanded its foodservice program over the past decade along with the footprints of its stores. The Atlanta-based, 500-store chain, which ranks fifth in market efficiency, recently introduced its Crazy Good Coffee bean-to-cup coffee program alongside an offer that includes Swirl World frozen yogurt.

Click here to see the complete list.

It’s a growing sign that the traditional levers of fuel price and location are not enough to grab volumes in today’s retail fuel business. Instead, brands need an in-store differentiator.

“Once you have the store, it’s where it is, so the only other real mechanism that drives sales is price, and we both know that the consumer is highly sensitive to gas prices,” says Michael Lorenz, executive vice president of petroleum supply for Sheetz Inc., Altoona, Pa., which has more than 580 sites.

Sheetz is focused on a bigger goal: using fuel to attract store sales. Low gas prices, Lorenz says, is not the magic bullet for this strategy. “You only can drive so many customers to the site based on gas, right? You get to a point of not only diminishing returns but you’re also just attracting the cherry picker who’s not going to come inside anyway,” he says. “That’s just not a productive customer overall. They’re just coming for the cheap gas.”

When it comes to its fuel business, Sheetz aims for sustainable sales, which requires it to balance gallon and margin growth. But it also relies on providing a one-stop shopping experience, with high-quality foodservice at its core. On the forecourt, having an adequate number of pumps and a clean, well-lit fuel island are “table stakes today,” Lorenz says. “In our case, I would say that the differentiator is going to be the rest of the offer.”

The Sheetz gasoline brand ranks No. 4 in the Fuels 50 list, despite pricing less than four-tenths of a cent below its direct competition in 2018, according to OPIS figures.

“You don’t need to match Costco-level prices to do well,” says Kloza. “You can do very, very well at a nickel below the average price, and that’s pretty obvious in a number of the companies that show up very, very high on this list.”

The gasoline brand for Spinx, an 80-store chain based in Greenville, S.C., ranks No. 9 in the 2019 Fuels 50 list, despite pricing more than 5 CPG above its direct competition in 2018, according to OPIS figures. Kloza suggests Spinx might have a positive price differential because its local competition is limited—or it could be the chain’s famous fried chicken.

Click here for the "Top 5 Store Brands by Market Share"

For the third year in a row, the Buc-ee’s fuel brand of Buc-ee’s Ltd., Lake Jackson, Texas, tops the Fuels 50 ranking. The chain, which recently opened its 35th location and its first site outside of Texas in January, is famous for its 50,000-square-foot c-stores with more than 100 MPDs. It has three more sites set to begin construction in Florida, the beachhead of a battle between some of the c-store industry’s biggest heavyweights, including Wawa and RaceTrac.

In 2018, Buc-ee’s had a market efficiency of 7.06 (compared to an industry average of 1), placing it nearly 2 points ahead of the nearest brand, according to OPIS figures. As the chain has grown over the past two years, this market efficiency figure has slipped somewhat, from 8.86 in 2016 and 9.13 in 2017, thanks to a slightly smaller market share.

Its price differential has also narrowed from 10.20 cents per gallon in 2016 and 10.34 CPG in 2017 to 8.40 in 2018.

Buc-ee’s declined comment for this story. A 2019 profile by Texas Monthly, which included an interview with co-founder Arch Aplin Jr., said, “The company can afford to undercut rivals not only because its locations have so many pumps but [also] because it makes its real money on jerky and stuffed beavers.”

In February, Buc-ee’s new Alabama site was sued by a rival travel center for selling gasoline and diesel “dramatically below cost” as defined by the Alabama Motor Fuel Marketing Act.

“They obviously have tremendous sales, and they’re very efficient and very, very big pumpers,” says Kloza.


Click here to view the "Top 10 Low-Price Leaders"

Continuing to grow volumes means building new sites, and location—or, rather, geography—matters.

“One of the recipes for success is to be in the suburbs or maybe the exurbs,” says Kloza, pointing to site selection preferences of brands such as QuikTrip. The gasoline brand for the Tulsa, Okla.-based chain ranks third in the 2019 Fuels 50 list, with a market efficiency of 4.88. This is higher than QuikTrip’s 4.66 market efficiency score in 2017, and is due in part to higher market share. In 2018, QuikTrip entered its first new markets in six years by opening sites in San Antonio and Austin, Texas. It plans to open more than 100 new sites as part of its initial wave in the cities.

“The new market in San Antonio and Austin has been great,” says Mike Thornbrugh, manager of public and government affairs for QuikTrip Corp., which has more than 780 locations. “We have been accepted early by the consumer as their choice for gasoline and convenience-store items. We have five open stores and around 20 sites under construction, and a lot under development. [We have a] long way to go, but the early results leave us very optimistic.”

As it grows in site count, QuikTrip also continues to expand its QT Kitchens, which offer fresh, made-to-order food such as pizza, specialty drinks and frozen desserts.

Among gasoline brands with 50 or more sites, Wawa Inc.’s Wawa brand has ranked No. 1 for the past three years. The market efficiency for the Wawa, Pa.-based retailer, which has approximately 830 sites, was 5.3 in 2018, up from 5.22 in 2017, according to OPIS. The chain’s price differential of 3.6 CPG in 2018 is about the middle of the pack for those top Fuels 50 brands. But this figure is somewhat deceptive, because it hides regional variations in pricing strategy.

“The way Wawa prices from Virginia north and the way Wawa prices [in Florida] are completely different,” Kloza says. “When they go into new markets, they tend to be very, very aggressive, so … they’re probably still very, very aggressive in Florida. But my hunch is if Florida were excluded from that ... they would be closer to an average price.”

For RaceTrac, which priced an average of 3.72 CPG below its direct competition in 2018, the goal is to stay competitive relative to the market.

“We price based on the markets that we serve, and we define those markets pretty narrowly, so we are always looking at competition and we are always looking at the communities around us,” says President Natalie Morhous. “As a result, you will see those prices vary as you look from Texas to Georgia to Florida to Louisiana, but what you will always see is that we are competitive on the street with the people around us.”

Click here to view the "Top 10 Most Efficient Store Brands"

With 2018 an active year in mergers and acquisitions, the repercussions on the Fuels 50 ranking will not fully be reflected for another year.

For example, Rockford, Ill.-based travel-center chain Road Ranger made its first appearance in the Fuels 50 ranking, with its gasoline brand placing No. 10 with a market efficiency of 2.63. It was acquired in 2018 by Empresa Nacional de Energia Enex S.A. (Enex), a subsidiary of Chilean conglomerate Quinenco, which promises to invest in and grow the chain. (Road Ranger declined comment for this story.)

And Thorntons, which slipped from No. 17 in 2017 to No. 49 in terms of market efficiency in 2018, was acquired by a nonoperating joint venture formed by BP and ArcLight Capital Partners in December.

Simon Richards, former head of regional development for BP Products North America, was recently named CEO, replacing Matt Thornton, who led the family-owned chain for several years.

Kloza sees this return to retail among refiners as a longer-term trend to watch [CSP—March ’19, p. 20].

“If you believe, like I do, that gasoline is going to be sloppy more than it’s going to be tight over the next few years, it’s going to be more compelling to have that downstream real estate … to know that your product is going to go to dedicated places,” Kloza says, and that it is “probably half of the BP rationale” for partnering with ArcLight to acquire Thorntons.

But there’s another possible rationale for refiners such as BP refocusing on retail: biofuel blending credits. For many retailers who sell E15—which includes Thorntons, as well as Sheetz, QuikTrip, Casey’s General Stores and Murphy USA—one economic incentive has been Renewable Identification Numbers (RINs), the biofuel credits blenders earn under the Renewable Fuel Standard (RFS) and sell to obligated parties such as refiners who need to meet biofuel blending targets.

“One of the big motivations for refineries to get more involved in the downstream was RINs and the incredible compliance costs that they have to pay if they didn’t have downstream, if they were a pure merchant refinery,” Kloza says. While RIN prices have fallen to about 20 cents, from more than 90 cents when President Trump was elected in 2016, “the notion of reintegrating, I think it’s still valid,” Kloza says.

While the sites will retain the Thorntons fuel brand, it’s not clear whether they will continue to sell E15 under the new ownership. Thorntons has been selling E15 since 2016 and had plans to roll it out to up to 100 sites in the Chicago area. Regardless, expect a shakeup of the Fuels 50 in 2020.

Click here for the complete 2019 Fuels 50 report.

Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.


Exclusive Content

Snacks & Candy

What Convenience-Store Consumers Are Craving in Candy, Snacks

Unwrapping the latest treats and trends from the Sweets & Snacks Expo

Snacks & Candy

Convenience-Store Shoppers Are Sweet on Private-Label Candy

How 7-Eleven, Love’s are jumping on confection trends


More from our partners