CST Brands: Turning a Corner

As CEO of Valero spinoff, Bowers brings fresh energy to new retail brand

Angel Abcede, Senior Editor/Tobacco, CSP

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▶An executive team in sync with each other and what customers want from convenience, ready to abandon a pump-first Big Oil mentality.

▶Ownership of 81% of the land beneath its stores, along with $300 million in cash from new fuel-contract terms  and access to a large credit line, which puts it in a solid financial position.

▶The beginning of a retail culture that prioritizes the feel and flow of stores, as well as a friendly front-line environment.

▶A distinctive foodservice mentality set to execute at the store level, having gone as far as developing original successes such as a savory “kolache” (think pig in a blanket).

▶A private-label program as extensive as any in the industry, capturing consumer trust despite essentially being tied to a gasoline brand.

▶The “perfect storm” of the Texas c-store demographic, a mix of Hispanics and energy and construction workers who, according to Bowers, result in stores that in some areas “just can’t keep product on the shelves.”

During an exclusive interview with CSP in November, Bowers and her team exuded a confidence blended with a sense of opportunity and challenge. For certain, the pillars of strong equity, modest debt and a solid strategy are emboldening the San Antonio chain to embrace a retail personality that received only modest attention while under the multibillion-dollar Valero refinery business.

Changes are taking place both culturally and among the stores’ product assortment. New policy changes include a jeans-all-week dress code and mandatory days in the field for administrative staff. On the culinary front, a new food czar is sizing up CST’s menu potential.

“We’re lucky [in that] this is a new company, but it’s not,” says Hal Adams, senior vice president and chief marketing officer for CST, referring to how it ran stores for 20 years under Valero’s watch. “We’re pent-up dogs ready to run.”

Bowers’ Power

The retail prowess and passion Adams mentions is what made the offer of running Valero’s retail spinoff attractive, Bowers says. Groomed for leadership under Valero Energy’s top boss, Bill Klesse, Bowers emerged not from the retail end but from the legal side of the business, operating for years as part of the company’s M&A team.

This team spearheaded much of the acquisition growth that would make Valero the nation’s largest independent refiner-marketer. (See the company’s M&A history on p. 44.) She joined Valero’s legal department in 1997, became vice president of legal services in 2003 and subsequently worked in compliance, legal affairs and engineering. She was executive vice president and general counsel at the time she was elected to lead CST one year ago.

During her rise, she’s had high-level discussions about what to do with a sprawling retail network built largely as an afterthought of a rapidly expanding refining universe. Break up the assets? Find a single bidder? File an IPO?

Eventually, the idea of a spinoff to shareholders prevailed. After obtaining a special tax-exempt letter from the Internal Revenue Service, Valero gave current shareholders a single stock of CST for every nine held in Valero. The remaining 20% would stay with Valero under an agreement that they would sell it on the open market at some future date.

All this finalized May 1 of last year when, as a spinoff company, CST Brands Inc. went public.

Heavy Lifting

Though CST enjoys the desirable advantage of owning most of its dirt,   it also faces the difficulty of a legacy network and the potential investment needed to keep those locations viable. A source close to c-store development in Texas says the “oil-company mentality” would often mean initial efforts to improve those locations failed as those in charge started to realize the true costs of what was needed.

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