A Concept to Be Shared

Mitch Morrison, Vice President of Retailer Relations

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We’re in the inspiration business.”This could be a quote from a preacher or motivator—not something you’d expect from a leading manufacturer of toilets and tubs, sinks and soap dispensers.

David Kohler, descendent of Austrian immigrant John Michael Kohler, who founded the kitchen and bath company 140 years ago, recently shared with members of CSP Business Media the philosophy behind his iconic family business.

His was a message of delighting the consumer, of blending utility with fun, of spurring continuous innovation with reservoirs of reinvestment.

Kohler’s words are at the heart of today’s cover feature by senior editor Angel Abcede. Angel and I recently toured CITGO’s new Retail Concept Center, a 4,500-square-foot showroom of engineering ingenuity, clever merchandisers, an audacious recycling program and an atmosphere that underscores the imagination of an interior designer.

CITGO’s current story is worth noting. It’s one of retrenchment, a story that does not portend the company’s decline but rather heralds its sharper focus.

CITGO is unlike any of the major oil brands. Its retail market strategy has been contrarian and remains so. While Big Oil in the 1980s rolled out wheelhouses of new retail concepts, only to eventually replace them with newer and fancier ones, CITGO would have none of it.

CITGO’s belief was: Let the retailer control the store, because our focus is fuel. So CITGO never sought to own or operate a single c-store. Instead, it embraced the jobber, the fuel marketer. It imposed few conditions and yearly held summits to solicit ideas from its network of petro marketers and dealers. And for that, CITGO would be recognized by one prominent fuel-marketer association for such redundancy that the yearly competition of preferred fuel brands was discontinued.

Perhaps CITGO was prescient. Today, most major oil companies have shed thousands of stores and cut ties to terminals and refineries, whose financial rewards paled to the companies’ upstream appetite. Like CITGO, these petro behemoths are relying on middlemen—the marketers—to haul their product to the myriad stores and stations that fly their flag.

So what are we to make of CITGO’s investment in a single retail store? Could this hatch a new oil-company-conceived convenience store?

As one executive after another emphasized during our visit, CITGO is not breaking its long-held tenets. It is pledging neither to enter into the convenience retailing business nor to impose retail conditions on its downstream network. Rather, its new center is a laboratory, a haven for piloting fresh initiatives and new technologies, to inspire its retail network to consider adopting an idea or two, or more.

How disappointing.

I fully respect CITGO’s decision and completely understand its rationale. Its trust in the fuel marketer and storyline of being a brand composed of momand-pops is compelling. There is a certain nostalgia and a code that CITGO is loath to break.

But can certain promises cede to changing times? Can aspirations give birth to a new vision?

I’m not suggesting CITGO embrace direct-ops or impose retail rules on its existing base of fuel marketers or station dealers. When talking to CITGO’s downstream team, one senses a child enjoying a new toy but perhaps knowing he must not become too attached to it.

There is a gleam that sparkles as officials give tours of their retail center, pride attached to the murals espousing a positive ethos, joy about giving voters a greater voice in the quality of in-store services. Could CITGO create a franchise program premised on flexibility but that would extend this new model to other markets, much the way Howard Schultz walked into a coffee shop 31 years ago, fell in love with it, sought unsuccessfully to persuade the owner to expand, and eventually bought the store himself and turned it into the greatest coffeehouse chain ever known?

I’m not suggesting CITGO become Starbucks. What I am encouraging is that CITGO see its new concept store as something truly distinctive, one worth taking pride in and sharing beyond the safety of its Houston home. 

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