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Los Angeles Times: Texaco Aims to Regain Star Status in U.S.

Los Angeles Times: Texaco Aims to Regain Star Status in U.S.

2 May 2005

By James F. Peltz, Times Staff Writer

 

Odd as it sounds, the U.S. arm of ChevronTexaco Corp. is getting back into the business of Texaco.

 

The Texaco brand of gasoline had withered in the U.S. market since 2001, when Chevron Corp. bought Texaco Inc. for $39 billion.

 

To get their merger cleared by antitrust authorities, the companies sold exclusive rights to the Texaco brand for three years to a group led by the Shell division of Royal Dutch/Shell Group.

 

There were about 12,800 Texaco stations in the U.S. at the time, including more than 700 in California. Most were converted to Shell stations over the next three years, and Texaco was poised to disappear from the U.S. market.

 

But San Ramon, Calif.-based ChevronTexaco regained the U.S. rights to Texaco last year, and it’s bringing back the brand.

 

“Texaco still has incredible strength and awareness out there,” said Danny Roden, head of ChevronTexaco’s North American marketing operations. “Our strategy is to maximize that benefit.”

 

It has already converted nearly 1,200 gas stations in the East and South to carry the Texaco banner. ChevronTexaco also plans to add 300 Texaco stations in eight Western states by year’s end, including about 75 in California.

 

The oil giant is convinced that the Texaco name still attracts loyalty, even in a commodity business such as gasoline. ChevronTexaco said that was evident overseas, where ChevronTexaco has continued to supply about 9,000 Texaco stations.

 

The company also plans to issue dual-branded credit cards that holders can use at either Chevron or Texaco stations, which would give Texaco an immediate base of 7 million potential customers nationwide.

 

In California, Chevron has 17.9% of the gasoline market, second only to BP’s Arco brand with 18.7%, according to Pacific West Oil Data, a monthly analytical report published by Economic Insight Inc. Shell has 14.5% of the California market.

 

Some analysts also believed that the Texaco brand still had value. “With the right visibility, advertising and support, they can build a good story and resurrect it,” said Alan Siegel, chairman of Siegel & Gale, a New York consultant on corporate branding.

 

Shell still supplies about 2,700 Texaco stations around the country, said spokesman Cameron Smyth, who otherwise declined to comment on ChevronTexaco’s efforts.

 

ChevronTexaco says its consumer surveys show that Texaco’s once widespread presence and its catchy advertising over the several decades still resonate with motorists.

 

One of Texaco’s most enduring slogans, launched in 1962, urged drivers to “trust your car to the man who wears the star,” a reference to the company’s logo.

 

Raj Saran is one of the newest dealers to wear the star. The owner of five stations in Central California, he recently converted one in Visalia from Shell to Texaco. The other four are Chevrons.

 

“It’s a brand name that was famous in the past,” said Saran, 56. “I like that people are familiar with that.”

 

Saran was persuaded to make the switch by Norm Crum, owner of Valley Pacific Petroleum Services Inc., a Stockton distributor that supplies Saran and other dealers with gas from Chevron and other producers.

 

“It’s not like you have to explain what Texaco is,” Crum said. “There’s a feeling of trust and recognition, which is a big part of branding, so that footwork has already been done.”

 

ChevronTexaco is relying on distributors such as Crum — known as “jobbers” — to persuade non-Chevron dealers to switch to Texaco. ChevronTexaco also provides the jobbers with cash, discounts and other incentives to help the new Texaco dealers install the Texaco signs, set up credit card accounts and otherwise re-brand the stations.

 

The company won’t break out those costs, but doesn’t argue with suggestions that the Texaco campaign is a multimillion-dollar effort.

 

Yet for all the consumer awareness Texaco still holds, its appeal varies by region, Roden acknowledged.

 

For example, “Texaco was not particularly strong in the Los Angeles basin,” he said. Yet the Chevron brand is, so the company is content to leave Texaco out of many metropolitan areas in Southern California and the Bay Area.

 

That leaves the rest of the state, where ChevronTexaco hopes that its dual-brand attack will take market share from Shell, Arco, ConocoPhillips’ 76 and other brands.

 

But bringing Texaco back in California’s ultra-competitive gasoline market won’t be easy, at least initially, because of the complex way in which ChevronTexaco and Shell divided their rights to the Texaco brand.

 

Texaco began as Texas Fuel Co. in 1901 and changed its name to Texaco Inc. in 1959. Its early television ads showed dealers singing, “Oh, we’re the men of Texaco; we work from Maine to Mexico.” They were regulars on “Texaco Star Theater,” a TV show hosted by the late comedian Milton Berle that had millions of weekly viewers.

 

When Universal Studios Florida built a 1940s gasoline station on its site as its symbol of motor travel, it placed a Texaco sign on the building. When the “Back to the Future” movies of the 1980s chose a gas station as a backdrop, it was a Texaco.

 

By 2001, both the Texaco and Shell refining and retail operations in the United States, along with their brands, were owned by two joint ventures whose partners included Texaco and Shell. (Most of the gas stations themselves are owned or operated by independent dealers who agree to sell particular brands of gas.)

 

To win government approval of their merger, Texaco and Chevron agreed to sell Texaco’s interests in the joint ventures to Shell. The deal gave Shell exclusive U.S. rights to Texaco until July 2004, after which Shell and ChevronTexaco agreed to share rights until July 2006. That’s when ChevronTexaco will regain the Texaco brand for itself.

 

So ChevronTexaco has been ramping up the Texaco brand while it’s still temporarily sharing the brand rights with Shell, and that’s causing confusion.

 

For example, if drivers buy gas at Saran’s Texaco station in Visalia, they’re buying ChevronTexaco gas. But if they drive 45 miles north to a Texaco station in Fresno, they’re buying gas supplied by Shell, Saran noted.

 

After they fill up at Saran’s station, some motorists “will try to use their Shell credit card, then realize something’s wrong,” Saran said. “We are having little problems like that.”

 

ChevronTexaco acknowledged that there will be snags until it regains the exclusive rights to Texaco. The company said it was planning advertising campaigns to educate motorists.

 

“The confusion will only be for the gas [credit] card holder,” Roden said. The company hopes that its new dual-branded cards will help solve the problem, and Texaco customers also can use bank credit cards as they do at any other station.

 

Once ChevronTexaco regains the exclusive rights to Texaco, all Texacos will get their gas from ChevronTexaco and Shell will be out of the picture.

 

Crum, the distributor, noted that Texaco’s brand awareness wasn’t built overnight and that it also would take time to erect enough Texaco stations to again make the brand competitive.

 

But with Chevron already a top-selling gas in California, and ChevronTexaco enjoying record profit from soaring oil and gas prices, “I think ChevronTexaco can afford to be patient with this rollout,” he said.

 

Crowded market

 

As ChevronTexaco tries to rebuild the Texaco brand, it faces a competitive gasoline market in California. Here are the major players:

 

California market share for gasoline among leading brands (as of Dec. 31)

 

Arco/BP: 18.7%

 

Chevron: 17.9%

 

Shell: 14.5%

 

76/ConocoPhillips: 13.7%

 

Exxon Mobil: 6.3%

 

*

 

Source: Pacific West Oil Data

 

History of an old Texas gusher

 

1901: The Texas Fuel Co. is formed.

 

1902: The company’s founders start Texas Co., which absorbs the previous firm.

 

1903: The new company is saved from bankruptcy by a gusher oil well at Sour Lake, Texas.

 

1911: Texas Co. opens its first filling station in Brooklyn, N.Y.

 

1931: Texas Co. gains the rights to the Havoline brand name.

 

1936: The company founds Caltex with Standard Oil Co. of California, which later became Chevron.

 

1959: Texas Co. changes its name to Texaco Inc.

 

1984: Texaco purchases Getty Oil Co.

 

1987: Texaco files for bankruptcy protection.

 

1988: The firm settles a four-year legal battle by agreeing to pay Pennzoil $3 billion.

 

1988: Financier Carl Icahn tries to take over Texaco.

 

1998: Texaco and Royal Dutch/Shell Group place U.S. refineries and gas stations into joint ventures: Equilon, serving the western half of the U.S., and Motiva, serving the eastern half in partnership with Saudi Aramco.

 

2000: Chevron Corp. agrees to buy Texaco Inc. for nearly $39 billion to create ChevronTexaco.

 

2001: Chevron and Texaco complete their merger after selling Texaco’s stake in the Equilon and Motiva joint ventures to Shell and the Saudis for $2.1 billion. Shell begins converting some Texaco stations to the Shell brand.

 

2003: ChevronTexaco begins sale of $6 billion in lagging oil fields, refineries and other assets.

 

2004: ChevronTexaco regains rights to the Texaco brand.

 

April 4: ChevronTexaco announces it will purchase Unocal Corp. for $16.4 billion.

 

Sources: ChevronTexaco, International Directory of Company Histories, Times research

 

http://www.latimes.com/business/la-fi-texaco2may02,0,4156356.story?coll=la-home-business

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