DALLAS -- With CITGO's complete or partial withdrawal from 14 states, including Texas, discussion has centered on how the changes will affect its relationship with its largest retailer, 7-Eleven Inc.
Truth is, not much. The relationship, established 20 years ago, comes to an official end in September. And with 7-Eleven piloting its own fuel brand, CITGO's role will ebb over the next 12 months.
The dissolution of a longstanding relationship is ending amicably, both sides tell CSP Daily News. CITGO has been great. They've been a [image-nocss] tremendous supplier. They've given us a Big Oil presence, said 7-Eleven President and CEO Joe DePinto during an exclusive interview. However, we think that given the current state of the market and the power of the 7-Eleven brand, that this is a good time to test a 7-Eleven gasoline.
[Learn more about 7-Eleven's fuel plans in the August issue of CSP magazine.]
7-Eleven is proceeding methodically with the 7-Eleven fuel brand. It is testing 150 sites, from Chicago to Ft. Worth, Texas, and is including both company-operated and franchised locations. Its network of 2,500 stores selling gasoline pumps more than 2 billion gallons annually.
For CITGO, the loss of 7-Eleven is obviously a blow, but officials here see a silver lining.
It does open up the door for many of our distributors, especially in the Florida base, where 7-Eleven is quite prominent, said Alan Flagg, CITGO's general manager of light fuels.
Our partnership and relationship with 7-Eleven has been very beneficial to us and, hopefully, to them too, says Bill Hatch, CITGO's vice president of supply and marketing. It's run its course. They're getting to the point they are going with a private label. It's an amicable end to a long relationship.
Earlier this week, CITGO said it was pulling out of 10 states, mostly in the Midwest, and scaling back in four others, including Texas. CITGO has supplied these markets ostensibly with third-party product purchased on the Platt's price and resold on the rack.
In a strategic shift, CITGO is halting outsourcing over the next 12 months and is, instead, relying on its three refineries in the U.S. to support a 9,200-site retail network that represents a 14% decline from its current base.
Company officials hoped the move would actually improve their supply relationships in core markets in the South, Northeast and Mid-Atlantic.
At least one state executive said he does not fault CITGO for its decision. The main accomplishment is that they can reduce the need to go outside their refining capacity to meet their branded contract gallons. I think it makes perfect sense, Jim Smith, president of the Florida Petroleum Marketers & Convenience Store Association, told CSP Daily News. The nightmare that is the spot market (both for price and availability) doesn't lend itself to any semblance of stability.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.