FRAMINGHAM, Mass. -- In 1976, there were 250,000 gas stations in the United States and 80% carried “the mark of a major.” This left 50,000 independents, with names such as “Joe’s Gas” or “Discount Gas.”
More than 40 years later, we are down to 168,000 stations and only 81,180, or 48%, carry one of the 17 designated major-oil brands. This leaves the average major with 4,800 flags, ranging from Shell with 16,000 sites to Getty with 1,000.
The private-branded stations of 86,820 sites, meanwhile, are populated by 22 recognizable c-store purveyors such as Cumberland Farms, Wawa, QuikTrip, Kwik Trip and Sheetz.
The 40-year headwinds facing major brands come from many factors:
- Development of liquid and transparent unbranded supply markets.
- Development of capital markets to finance stations without major oil assistance.
- Realization that fuel is a nondifferentiated commodity.
- Inability to command a brand premium.
- In several instances, with the development of food and beverage, a major brand decreases traffic flow.
- The major oil’s desire to not own real estate, operate convenience or manage dealers.
- The realization that price, visibility, egress and location sell gasoline, not brands.
In fact, the brand premium a 1 million-gallon site would pay is $20,000 per year, which at current interest rates covers $250,000 of capital infusion into the site, which generates a better return on capital.
There is no sign of this 40-year trend stopping or reversing the decline. Gas stations may level out to 150,000 locations; if so, we could see the brand percentage drop to 40%, or 60,000 stations, as the few remaining service bays close or transition to convenience, and the smaller-volume stations get absorbed by the midsize chains.
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