SANFORD, N.C. - At some point, nearly every driver has wondered why one gas station charges $2.93 a gallon and another $2.89. There are 11 people in a faded blue trailer in Sanford, N.C., who know the answer, according to a report by The News & Observer.
Those 11 are responsible for setting the gas prices at the 1,639 stores owned by The Pantry, the Southeast's leading independent convenience store chain. They crunch numbers, run data and transmit new prices to each of the stores every day but Sunday.
Mark Holmes, who leads [image-nocss] the team, calls what they do there a never-ending puzzle, balancing the need for profit with the need to sell more gallons and keep up with the competition.Their job has gotten harder, said the report, as gasoline pricing has become more volatile and the public's resentment of rising fuel prices has grown.
On Friday, the team's day started about 8:30 a.m. Nine- and 10-hour days are typical, but Cliff Sizemore was expecting the worst because the market that determines the daily price of gasoline sold to The Pantry and other companies had closed higher, a substantial 91.4 cents, the previous night. That increase meant that all gasoline retailers would be making big price adjustments.
There were other factors: Wildfires in Florida had triggered a state of emergency. A report predicted a rough hurricane season. And several refineries were shut down.
Then there's the competition. I can say, Go up 10 cents,' if I want, but if I'm at $2.60 and the guy across the street is at $2.50, I just lost a ton of business, Holmes told the newspaper.
Halfway down the trailer's hallway, Cindy Marsh's phone rang constantly as district and store managers from her Mississippi and Louisiana territory called in for guidance. As part of the morning routine, each store manager checks competitors' prices and reports them to headquarters. Some stores track as many as nine competitors.
Many report through the company's electronic system. Those with more pressing concerns call in. On busy mornings, the team can easily field 2,000 calls, the report said.Friday morning, Marsh's interchanges with her managers came in rapid-fire bursts. Where'd they move to? $2.84? Where'd you move to? $2.82?She said, I want us to be the first movers here, if you don't mind. Let's take them up to $2.84.
Down the hall, Michelle Knight's Florida stores were calling for updates. Because a state of emergency had been declared, companies could not immediately raise their prices, despite the overnight increase in gasoline costs. We lost a lot of money last night, she told the paper. They're all on pins and needles waiting for the competitors to move.
In an office between Marsh and Knight, Sizemore dealt with a distribution problem created when the supply of Exxon gasoline at the Selma, Ala., terminal ran out and he had to route drivers to Greensboro, N.C.
It takes a little while for new people because they're scared to drop it even by a penny, Holmes told the paper. Then again, he said, reaching for a nearby calculator, A penny times 5,000 gallons a day is $50. Times 365 days and 1,600 stations, it's $29.2 million.
About 11:30 a.m. each day, Holmes and other Pantry executives hold a five-minute meeting. On the table: what happened overnight, what the competition is doing, how aggressive they want to be with prices, and which markets they want to be more active in. For instance, The Pantry recently acquired 66 Petro Express stores in Charlotte, N.C., and wants to be sure that its prices are the ones that the other stations follow.
Striking the balance between profits and gallons sold is the biggest challenge, president and CEO Peter Sodini told the News & Observer. As a publicly traded company, The Pantry wants to increase the number of gallons it sells each quarter, the report said, because that is a figure watched closely by the Wall Street analysts who follow the company.
After the strategy meeting, Holmes shares the day's strategy with team members, who go back and adjust prices for each store. The team's changes go out in one big report every day, usually about 1 p.m.; no later than 2:30 p.m.Prices can change again during the day at any station, depending on the competition, said the report. But for most of the team members, the afternoon is spent managing supply and distribution for districts.
The prices set on Fridays are particularly significant, because they tend to stick over the weekend. There is a skeleton crew that works Saturday to make adjustments, but many stations will hold the same price all weekend. We'll have some competitors who will try to sneak one in and change them late Friday after we've changed, Holmes said. But we catch them Saturday morning.
Now it is routine to see prices fluctuate by five or six cents a day. It used to be that a half-a-cent-a-gallon increase was big, he said.When there are big spikes, the entire increase is rarely passed on to the consumer, Holmes said. But the company tries to recoup some of it when prices go down. When the market goes down a penny, sometimes you've got to keep that penny, he added.
It is that kind of action that leads consumers to yell price gouging, according to the News & Observer. Sodini acknowledged that gasoline prices can be confusinghe sometimes has trouble explaining all of the factors involved to his own board of directors, he said.He understands consumers' anger, he said. Gas is one of those products. You slap a consumer in the face with it. You put the price up on a 30-foot pylon.But, he said, it is competition that keeps the gasoline companies from gouging. If I'm overcharging, [consumers] are not going to pay that if they know they just passed something cheaper, he said.
He said he knows his efforts to defend against accusations of gouging are sometimes futile. You're never going to convince them that you're not shafting them, he said, and he recognizes that they're not going to believe a word of it.
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