CHICAGO -- Following the lead of some fellow major oil companies, BP Products North America seems likely to spin off many more of its company-operated stores to independents and other entrepreneurs. While there appear to be no sacred cows, as suggested by one industry source, such moves could ultimately strengthen BP's core brands.
There's no market that's being kept off the for-sale sheet, an industry insider told CSP Daily News. I would consider Chicago a premier market for BP. But last I heard, BP had 30 to 40 sites for sale in Chicago. That tells [image-nocss] me they're willing to get out of any of their major markets [by selling off company-operated stores].
BP has worked with commercial real-estate specialists NRC Realty Advisors to sell approximately 300 sites since January, with 60 more in 2005, based on a rough count. Transferring individual site stewardship to a cast of established entrepreneurs or independent operators may ultimately prove beneficial to BP's U.S. business, according to a company representative.
In a nutshell, this is really the best way for BP to grow its brand, BP spokesperson Sarah Howell told CSP Daily News, referring to a recent announcement that BP would sell 34 properties in South Florida. It seems thisis a great way to grow with these entrepreneurs [who are buying BP sites] and deliver our brand and our products to consumers. It's an effective growth strategy, too. It may be difficult for BP to manage various markets and various sites, so working with entrepreneurs can actually help us grow.
The new strategy has meant some changes in company personnel. Howell could not speak to the specific changes; however, in the past, company officials have said the cuts could affect as many as 40% of the corporate staff overseeing retail operations.
Chicago-based NRC has helped BP surgically auction off branded gas stations and convenience stores, as well as undeveloped commercial properties, since 2005. Key market areas have included Southeast Florida, Arizona and metro Atlanta, as well as regions such as the Pacific Northwest, the Midwest and Northeast.
The BP selloffs signal a wider industry phenomenon. Many large oil companies, according to the insider, have unrealistic expectations of their retail enterprises' profit performance. When the results aren't deemed acceptable, the stores are spun off to other operators as a means of improving a company's perceived financial fitness.
The challenge is that you have is these major oil companies that are addicted to higher ROIs, and they're used to seeing these huge, huge numbers, said the insider, who spoke on the condition on anonymity. But the retail side [of the motor-fuels business] doesn't generate those kinds of returns. With BP, London keeps seeing these numbers from retail and they're not as sexy as the numbers from their other business units.
Some of the oil companies, he continued, whether it's BP or someone else, get frustrated or disheartened or otherwise think, How can we make this company look even better for our investors?' You get out of the dead weight as best you possibly can to make it look better on the balance sheet. In the oil company's eyes, that's often what retail is: dead weight.
BP has approximately 14,000 U.S. stations under the BP, ARCO and Amoco gasoline brands. Of those, about 3,500 are company- or dealer-operated stores, while 10,500 are owned or supplied by independent marketers. As part of its normal on-going business activity, BP constantly reviews its network to ensure it maintains an efficient and comprehensive offer to the customer, according to an NRC news release. An integral part of this review includes an assessment of whether the company should continue to own any specific site.
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.