Philadelphia Inquirer: Gas stations change brands and strategy

Philadelphia Inquirer: Gas stations change brands and strategy

“Peebles said it is unclear what is going to happen to the rest. Those that Shell owns could be sold or closed. ”

New names such as Valero and Lukoil appear. The industry turns to independent firms to do its marketing and delivery.

By Harold Brubaker

Inquirer Staff Writer

Posted 10 August 04

Your old Texaco suddenly sports Shell’s bright red and yellow. Amoco’s torch is giving way to BP’s multicolored sunburst. Lukoil and Valero gas stations are popping up around Philadelphia.

This shifting of brands at gasoline stations – those conspicuous features of the commercial landscape that link most Americans to Big Oil – is the aftershock from dramatic industry consolidation since the late 1990s.

The changes frequently go beyond new paint and decals. Industry experts said major oil companies are limiting their exposure to gasoline retailing by keeping only their best sites and increasingly relying on independent marketers and distributors to move fuel along the final stretch into consumers’ tanks.

That has created huge opportunities for these middlemen – also known as jobbers – who pick up gasoline at refineries or terminals and deliver it to stations they have under contract. Many of them distribute more than one major brand. Some, such as Riggins Inc. in Vineland, distribute a major brand and their own private brands.

The changes that have taken place so far are just the beginning. “There are a lot of sites in play right now,” said Ken Applegate, vice president of wholesale marketing at Valero Energy Corp., the third-largest U.S. oil refinery.

The San Antonio company, which owns the former Mobil refinery in Paulsboro, has opened at least a half-dozen Valero stations in the Philadelphia region since May, with more to come. Valero is working through distributors, such as Bellomo Fuel Inc., of Linden, N.J.

“These guys are growing because the majors are leaving,” Bellomo president Louis Ramsay said, referring to Valero’s expanding retail network on the East Coast.

At the end of May, Ramsay opened his first Pennsylvania Valero in Bristol at a vacant Getty site. Ramsay said he may hire someone to canvas Philadelphia-area gasoline station operators about switching to one of the brands he represents. Besides Valero, they are Citgo, Getty and Gulf.

Several developments make the Philadelphia area fertile ground for such an effort.

Shell of the American Road

As part of a nationwide, $500 million rebranding program resulting from the merger of Chevron and Texaco in 2001, Shell Oil Products US is converting about 100 of the estimated 250 Texaco stations in the Philadelphia region to Shell. It has completed 64 makeovers and expects to have the remainder done by the end of the year, spokeswoman Anne Peebles said.

Peebles said it is unclear what is going to happen to the rest. Those that Shell owns could be sold or closed. The others will have to find another supplier or go out of business.

Shell, which is part of Royal Dutch/Shell Group, had a joint venture with Texaco that included certain Texaco refineries and marketing operations. It bought out Texaco when Texaco merged with Chevron in 2001.

ChevronTexaco has resumed supplying gasoline under the Texaco brand in 13 states from Texas to Maryland, but had not decided whether it will come back into the Philadelphia market, said Jim Haden, manager of ChevronTexaco’s Texaco brand initiative.

From Amoco to BP

BP P.L.C., which bought Amoco in 1999 for $62 billion, has been converting more than 9,000 Amoco stations to its brand since 2001 – going out of its way to make sure people know that the stations still sell Amoco fuels.

Philadelphia, where the company is converting 100 sites from the familiar red, white and blue striping to the green, gold and white color scheme of the new BP, is one of the last markets to get the change, company spokesman Scott Dean said. It expects to be done here by the end of the year.

Some Amoco Split Second convenience stores, such as those in the East Falls and Roxborough sections of Philadelphia, are part way through the BP conversion process with green trim on the canopy and new pump covers. At many Split Second sites, Amoco’s oval sign with the torch sticking out the top still stands on the corner. That is the last thing to go, said Kathy Leech, BP’s director of U.S. communications.

No Rush to Lose Getty

Russian oil giant Lukoil plans to convert 1,300 Getty stations between Maine and Virginia and more than 750 Mobil stations in Pennsylvania and New Jersey into Lukoil sites. The rebranding is part of an effort to deepen Russia’s energy ties to the United States, spokesman Joe Schwirtz said.

But so far there are just 24 Lukoil stations in the United States, including four converted Getty sites in the Philadelphia region. Lukoil bought Getty Petroleum Marketing Inc. in 2000.

The Mobil stations, which include 471 supplied under contract but not owned by the fuel company, were purchased in May from ConocoPhillips Co. for $266 million.

Schwirtz said Lukoil intends to put its own red and white image on those sites over the next three years.

Mobil stations in the Mid-Atlantic region, in particular, have passed through many corporate hands recently. Tosco bought 1,180 of them in 2000 as a condition of the $88 billion merger of Exxon and Mobil in 1999. Phillips Petroleum Co. bought Tosco in 2001 and then merged with Conoco Inc. in 2002.

That shifting industry landscape has led to convoluted relationships. “I’m buying product from Lukoil, which is getting the product from Valero and selling it as Mobil,” said Paul Riggins, whose family operates a large fuel distributor in South Jersey.

Riggins, who has been a Mobil distributor since the mid-1980s, said he doesn’t know whether he’ll stick with Lukoil or not.

Sunoco Inc. is the dominant oil refiner in the Northeast and a driver is never too far from one of its yellow diamonds. But even Sunoco has bought and sold stations in other regions of the country as it attempts to tap growing areas.

Locally, individual dealers are weighing their options. For example, Don Kelley, who owns a Mobil station in Newtown Square, said he’s wary of signing up with Lukoil when his 10-year contract is up in two years. He said he had already talked to other brands.

Lukoil spokesman Schwirtz said the Russian company had been positively received by Mobil distributors and dealers.

Some Amoco dealers have been unenthusiastic about switching to BP, according to Ramsay. He said he had converted a half-dozen Amoco stations to Valero, Citgo, or Getty because the operators didn’t want to become BP.

Leech, the BP spokeswoman, said dealer resistance to rebranding had not been an issue for the company since the first wave of changes in 2001.

Independent distributors are also expanding their operations through acquisitions from major oil companies. Lehigh Gas, for example, bought Exxon Mobil Corp.’s 60 Philadelphia-area Exxon stations in March that the Irving, Texas, company had supplied directly.

Experts said local control is a better way to organize distribution and marketing. “It’s hard to sit in Houston, Texas, and make decisions about merchandising in Bucks County,” said Dan Gilligan, president of the Petroleum Marketers Association of America.

He said it also is hard to keep up with the state environmental regulations and local departments of weights and measures.

On the street, many consumers are focused on price. For example, Mark Desroches, an automotive parts salesman who lives in Yardley, said the new Valero station in Bristol looks a lot nicer than it did as a Getty.

But he stopped there for the price, which was tied with Wawa for the cheapest cost per gallon last week along that stretch of Route 13 in Bristol. He said he drives 3,000 miles a month, and “that’s why I shop price.”

Contact staff writer Harold Brubaker at 215-854-4651 or [email protected].

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