A Tale of Two Refiner-Marketers

Valero, Speedway execs share companies' rare passion for retail

Published in CSP Daily News

By  Samantha Oller, Senior Editor/Special Projects Coordinator

Tony Kenney (left), Gary Arthur

CHICAGO -- At a time when refiners are quickly divorcing themselves of their retail holdings, two refiner-marketers are embracing their street presence as a counterbalance to the cyclical fall-off of refinery margins. In a "Tale of Two Retailers" panel at the 2011 NACS Show in Chicago, moderated by Cumberland Gulf CEO Joe Petrowski, Tony Kenney with Speedway LLC and Gary Arthur of Valero Energy presented their retail philosophies and opportunities.

For Valero, San Antonio, retail is focused on five platforms, Arthur explained:

  • Foodservice value and quality.
  • Private label, which began with an offering of 100 SKUs, and will expand by 50 more SKUs in 2012.
  • Self distribution, through Valero's Texas warehouse.
  • An emphasis on the core categories and big brands within beer, tobacco, packaged beverages, snacks and candy.
  • The expansion of services such as car wash, ATMs, lottery and RedBox DVD rental kiosks.

With 995 company ops in eight states and 1.2 million customers a day, Valero is a leaner, more productive company after it culled underperforming sites over recent years. The result: Valero's Corner Store sites are three times more productive than the average of only a few years ago.

Speedway, Enon, Ohio, has also hit its fighting weight, spun off with Marathon's refining and terminal business into Marathon Petroleum Corp. (MPC), and down to 1,375 sites after it exited nonkey markets. The fifth largest U.S. refiner and fourth largest company-owned and operated convenience store chain serves more than two million customers a day with a dedication to elevating its brand positioning.

Components of this effort include:

  • Customer service, delivered by 19,000 Speedway employees.
  • The Speedy Rewards loyalty program, Speedway's "go-to-market strategy" with 3.8 million active members.
  • A dedication to consistency in its retail offering across the network, which develops trust and confidence between the retailer and its customers, and forms the foundation of its brand equity.
  • An embrace of technology to help trim costs and keep the company running efficiently.

Petrowski asked both execs why, as many refiners exit the retail and wholesale distribution businesses, their companies continue to hold on to theirs and indeed grow them. Arthur explained that Valero's investment in retail and its growing ethanol business help provide counter-cyclicality to its refining business.

A big point of difference between Speedway and the majors, said Kenney, is that his chain has differentiated its retail business--Speedway--from its distribution brand, Marathon. "We set it up on purpose to execute against the brand promise," he said. In addition, the retail and wholesale businesses create flexibility and synergies for MPC's pipeline and terminal businesses.

With both Valero and Speedway trimmer versions of their previous selves, Petrowski asked whether the general consolidation trend in the c-store channel will expand. Kenney noted that the c-store model has replaced the old two-pump setup of the past and is more viable in the long term. "I think there is still room for rationalization of assets," he said, but sees them being replaced by new, larger sites.

"We will see some decline, but not as dramatic as over the past 20 to 30 years," said Arthur, who pointed out that the channel is still very fragmented. At the same time, sites are much more efficient and productive than stores of the past.

One area of new growth for today's c-store industry--foodservice--is still a work in progress at both chains. Kenney described Speedway as a "good foodservice operator, not a great one," and said the industry has to raise the perception of what it can offer consumers in terms of food. Similarly, Arthur said Valero was not built on foodservice, but has come "a long way," with its advanced foodservice program rolled out at 40% of its sites within the past five years of its existence. Even so, it is no silver bullet.

"Foodservice is not perfect for every store," he said. "It's just one of those levers we pull each day to improve our business."

Keywords: 
petroleum
By Samantha Oller, Senior Editor/Special Projects Coordinator
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