Stay or Go?
Published in CSP Daily News
Marketers weigh post-spill risks, rewards of committing to BP brand
OAK BROOK, Ill. -- The immediate crisis that started on April 20, when a hobbled BP deepwater drilling rig began fouling the Gulf of Mexico with oil, has drawn to a close. The harm to the BP brand, however, could very well linger. With efforts now turned to cleaning up any remaining sludge and repairing the BP brand itself, a question remains: Can BP recover and retain its position as a premium brand in the eyes of its existing and prospective marketers?
Jimmy Morgan, president of BP distributorship Morgan Oil Co., Carrollton, Ga., said his warm feelings toward BP have [image-nocss] not changed. His business dipped "probably 10%" when the crisis began, but he said that he believes the lingering economic recession and an increase in the number of big-box retailers with a thirst for motor fuels contributed to the volume shift.
"All I see from customers is concern about me as a businessman, so I don't think we are [in trouble]," Morgan told CSP Daily News. "Once BP has cleaned everything up and all the media has gotten out of the area, then I think you'll have people say, 'This company made something right that they could have just walked away from'. People complain that they were told to do it the fastest and cheapest, but there's no such thing as a businessman who tries to do something the slowest and most expensive way."
He added, "When I go to build a station, I'm paying half a million for the land alone, and the interest starts immediately. You have to capitalize that interest until the day you open the door, so every month I don't get a store complete, I'm paying interest... The government encourages you to race to open something as quickly as possible."
A small Midwest marketer, who commented on condition of anonymity, said some of his BP-branded stores suffered 20% volume losses immediately after the spill. Unlike Morgan, the marketer said lingering consumer discontent would make him consider rebrandingeven to a nonmajorif given the option. Most of his sites, however, have deed restrictions prohibiting them from flying anything but the BP flag.
"This is a disaster to haunt us for many years to come because I don't know if people will forget about something so quickly," said the marketer. "It's difficult and it's a double-edged sword, because it shows we're just selling a commodity for BP... People are pushing toward flying someone else's flags where they can. Most people want to be as far away as possible from BP."
It's understandable that some dealers and franchisees, especially those most affected by consumer backlash in the spill's aftermath, talk of cutting ties to BP and rebranding when the opportunity arises; however, maintaining regular communication and a strong sense of transparency during times of crisis can help a brand owner strengthen ties with dealers and franchisees, according to Alisa Harrison, vice president of communications and marketing for the International Franchise Association, Washington.
"Franchisees and dealers are a big part of the target audience [in a crisis], so there needs to be great information and multiple distribution points," she said. "I certainly hope BP is doing that and I have no reason to think they aren't... It is important to remember that a contract is in place, so there are all kinds of things that go into a decision when franchisees decide to renew, including how the company reacts [to a crisis]. I'm sure this will play a big part in whether or not franchisees decide to renew when the time comes."
John Strickland said that he bears no ill feelings toward BP, whose flag he flies at 29 stations, including 14 company-operated stores. He said that he believes BP has been "very good" about sharing information throughout the crisis and in getting distributors talking to each other as a way to address potential problems, such as how to react to protests or aggravated customers.
"This spill or whatever you want to call it hasn't changed how I think about my relationship with BP," said Strickland, president of Wayne Oil Co., Goldsboro, N.C. "They've been very clear in saying, 'We've put you in a bad situation, John, and we're going to do the best we can to get you out of it'."
On the other hand, some marketers have suggested BP has become a "bad word" and could benefit from a brand overhaul. One suggestion: replacing the BP helios with the red, white and blue torch of Amoco, a brand many consider a slice of Americana that was retired soon after a 1998 merger between the two oil companies. Whichever direction the company decides to take, industry pundits suggest BP will do all it can to not only scrub clean the Gulf Coast but also reinvigorate its retail network.
(Click here for previous CSP Daily News coverage of BP.)"BP has said clearly they are committed to the brand in the U.S.," said John Kleine, executive director of the BP Amoco Marketers Association, Savannah, Ga., which represents BP's 475 U.S. jobbers. "They have such a huge part of their investment committed to the U.S., and I have to believe that they are always going to be committed here. Their words and actions point very strongly to the commitment to bringing the brand back to its former state."
Although some marketers may be seeking ways to cut ties with BP as soon as possible, most have wisely chosen a "wait-and-see" approach before making any tough decisions on branding strategies. Jay Ricker, president of Anderson, Ind.-based Ricker Oil Co., whose 50 stores include 17 franchised BP ampms, is among them.
"It's a tough situation for everyone involved: for BP, for BP employees, for BP marketers and for the ultimate customer," said Ricker. "Just in our operation, we've seen no appreciable difference in sales or customer comments. I'm sure there are some who are emotionally upset and it affects them on a more direct basis. I want to see this play out and see how they handle it."
For more on the Gulf Coast spill and its long-term effects on the industry, look for the September issue of CSP magazine.