Jobbers: Post-Honeymoon Bliss?

By
Kenneth Shriber, Managing Director, Petroleum Equity Group

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In June 2010, in this magazine, I wrote  a column about the future of fuels  retailing after the liquidation of the  thousands of retail branded assets and  businesses sold off by major and regional  oil companies to local jobbers. The content  of the article was focused mainly  on helping fuel marketers/distributors  properly bid on and acquire assets at  the right price. However, it also touched  upon how to effectively transition the  store operators/dealers that were to be  “acquired” with the hard assets. 

Now, nearly two years later, and as a  footnote to this issue’s cover story, I offer  some fresh perspective. 

Since I started my company in 2008, I  have worked on numerous acquisitions.  As an “industry insider,” I have also had  the benefit of hearing about and observing  what transpires after the closing and  after the honeymoon period expires and  reality sets in. 

What should be obvious here is that  the relationship between the jobber  and a store operator is very much like  a marriage. And just like a marriage, the  parties must work together if they are  both to grow and prosper. 

While jobbers and the operators of  their stores are not “partners” in the true  sense, they are absolutely reliant upon  each other because they have mutual,  connected business interests. As such,  the relative financial well being of both is  extremely important for a store chain to  remain viable, especially in today’s strained  economic climate. Dealers/commission  agents/operators must have a healthy  business model if the distributors who  deliver fuel and otherwise service them are  to maintain a healthy balance sheet. The  converse is also true as in any symbiotic  relationship, like a marriage. Each is reliant  on the other for survival. 

Keep a Healthy Relationship 

In these circumstances, the advice I offer  my clients is as follows: 

1. Extend an olive branch: The way  in which your company acts toward its  operators is extremely telling about how  the business relationship is going to work.  Whether you have acquired assets recently  or have had them under your stewardship  for some time, the jobbers’ goal should  be to display cooperation vs. being rigid  or inflexible toward operator needs. Any  appearance that their relatively new jobber/  supplier is intransigent will be met  with resistance, which can lead to poor  business relations and stagnant fuel volume.  You should continuously look for  ways to help them grow their business and  maintain relative financial health.

2. Offer meaningful marketing  programs: The day you closed on your  acquisition is the day you became the  “face” of the brand in the eyes of your store  operators. And while the oil companies  substantially cut back on retail marketing  programs over the years, there was a  baseline of marketing support. Consider  ways to develop value-added economic  programs that can enhance the brand  and generate volume. Suggestions could  include fuel-quality messaging, promotional  tie-ins with motor fuel if permitted  in your state(s), and promoting creditcard  or loyalty-program benefits. 

3. Test the water with volume-based  incentives: Back in the 1990s, it was common  for oil companies to offer their retailers  incentives for volume growth based  on percentage year-over-year increases  accompanied by cents-per-gallon rebates.  These programs were relatively successful,  and they allowed operators the opportunity  to improve their overall bottom line.  Because the U.S. retail volume outlook  is generally flat, this may be one way to  stimulate demand. This does not have to  be a “back to gallon one” program, or even  for all grades. Be creative. Also be sure to  test-market and check for competitive  reaction. 

4. Consider offering a rent-to-buy  program for operators: Retail operators  prefer to own their property, and it may  be advantageous for you to consider selling  the property or establishing a rent-toown  structure in certain cases. And with a  long-term supply contract and less capital  employed, this may make good business  sense for both parties. 

5. Maintain an open-door and “willing  to listen” policy, and mean it: It costs  you nothing and will go a long way toward  building solid relations with operators.   

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