Ideas 2 CITGO

New concept store gets wheels turning with movable gondolas, gourmet grab-and-go foods and high-tech upselling.

Angel Abcede, Senior Editor/Tobacco, CSP

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Building Trust

There’s no doubt that CITGO has spent many years, even decades, building trust among its distributors. So much so that CITGO repeatedly has captured PMAA’sSupplier Cup, in large part because it did not run direct operations, funneling nearly every gallon sold through its jobber/wholesaler network.

“From 1995 to about 2005, suppliers were hands-on with their plans for c-stores and how they should be set up and run,” says Dan Gilligan, president of Arlington, Va.-based PMAA. Opting not to single out any particular supplier, he says oil companies in general are changing the character of their assistance, moving from command-and-control to advisory positions.

But CITGO from the get-go, as it were, was always focused on partnership and supply, going to great lengths to emphasize how the Concept Center is only a single test and in no way a step toward building its own chain. Over the years, it also developed a reputation of varying its contracts to better support marketers in the field. “We want to avoid being cookie-cutter,” says Flagg.“A lot of majors dropped their lines in the sand [with volume minimums], but we’ve built our success on being flexible with customers, understanding markets and, yes, recognizing higher quality standards but knowing they’re not the same in every market.”

Maintaining trust over the years has been a focus for the company. “Trust is a big deal in our business,” Flagg says. “We want to offer good business, business that we can sustain going forward.” In 2006, CITGO made the decision to pull out of 10 Midwest states, deciding it was better-off basing its supply around its three refineries (one each in Illinois, Louisiana and Texas) and network of company owned terminals.

In the years since, the U.S.-run CITGO had fl own under the radar, becoming one of Venezuela’s greatest assets, according to Tom Kloza, chief oil analyst for GasBuddyand OPIS, Gaithersburg, Md. It has done so by staying independent.

“The tendency is to believe that PDVSA just wanted to force-feed its crude [to CITGO]. That’s not the case,”Kloza says. CITGO is “diversified in what they run, taking advantage of North Dakota [supply] … Eagle Ford shale. …They’re the beneficiaries of some of the cheapest sweet crude.”

Its supply-chain flexibility is an important tool, especially as pressures build for fuel brands to retain and grow their distributor base. One such pressure comes from renewable identification numbers (RINs),or what refiners have to pay for if they don’t sell the proper amount of environmentally regulated product. For many, that means selling as much branded product as possible, Kloza says.

It’s a pressure all refiners feel, with many creating new fuel related programs such as gas-for-groceries loyalty offers, all in an effort to differentiate themselves and grow a distributor base. CITGO also has a loyalty strategy, offering the choice of four providers and up to $2,000 in startup assistance.

Flagg agrees that CITGO is positioned to remain competitive in the current market environment, including RINs, and that competing fuel suppliers are doing all they can to build their businesses. He still believes in the company’s current strategies—even the retention of its network of owned and operated terminals.

Kloza says the company is an anomaly in that competitors have sold off those assets. Again, Flagg says the company believes in its current go-to-market tactics and has the profit its to prove it.

Fuel suppliers “need loyal marketers,” Kloza says. “They have to do things to help them pump up the volume and help them prosper. Everyone is recognizing that now.”

Brand Rebirth

For CITGO, the introspection occurred back in 2006 with its market retrenchment, a jettisoning that initially cast some doubts on CITGO’s long-term viability as a prominent brand but ultimately fine-tuned the company’s current market strategy.“That’s when we realized what we could do best, what we were good at,” Flagg says.

Discussions from that time on focused on the future and how to re-energize the brand. As a result, its Centennial Image debuted three years ago, bringing to market a cleaner, bolder look. “We’ve heard of 3% to 5% to 7% lifts in volume [for marketers],depending on who you talk to,” Flagg says.

That momentum led to the building of the Concept Center, the result of brainstorming sessions during its marketer council meetings. Participants deemed the idea “brilliant,” with corporate eventually giving it the green light. Building began last year, and the facility opened in March.

With many oil companies having completed their retail exits, efforts to help but not command retailers are going to keep coming, predicts Gilligan of PMAA.“Branded fuel suppliers are doing everything they can to make retail outlets more efficient and attractive,” he says. “So if they can come up with designs implemented in an affordable way that helps the c-store owner and independent retailer, they’ll do it in a heartbeat.”

CITGO by the Numbers

1 vs. 6,000

The number of concept stores planned vs. the number of stores it supplies.

0 vs. 48

The number of terminals most oil companies own today vs. how many CITGO retains.

2,500 vs. 4,500

The amount of square footage a typical CITGO retailer store has vs. the Concept Center.

16; 102 feet by 30 feet

The number of fueling positions at the Concept Center and the dimensions of its canopy.

2 acres

The amount of land the Concept Center is built on, enough to expand with concepts such as car washes, officials say.

$461 million

The record dividend CITGO paid to its parent company in the first quarter of 2013.


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