September 11, 2007
Shell to Sell Remaining U.S. Retail Sites by 2009

Shell plans to sell to wholesalers and joint venture companies what is left of its directly operated retail chain, Oil Express learns.

The major will put on the block its last 1,800 stations, and expects to finalize the sales by the third quarter of 2009. Volume is estimated at 3 billion gals/yr, sources say.

Affected markets are Los Angeles, San Diego, San Francisco, Seattle, Chicago, Boston, Miami and Ft. Lauderdale, New York, including New York City, and New Jersey. Also for sale is the Washington, D.C., market, which will be split into at least three packages, as exclusively reported (OE 09/24/07).

Shell previously said it would sell 16 markets, comprising 950 stations and about 1.5 billion gals/yr gasoline and diesel, through 2007 (OE 12/05/05). At that time, the company said it would keep nine other core markets, the jewels in its retail crown. However, it subsequently sold its San Diego stations and 50% of its L.A. sites to Tesoro (OE 02/05/07). Shell told employees of its decision via a Webcast from Boston late last week.

The change of heart will lead to large job losses. Shell officials will not talk numbers, but some sources say as much as 30% to 40% of Shell's employees may be reassigned, be asked to take early retirement, or just be out of a job. Shell says it will work to find marketing personnel positions in other parts of the company.

Shell execs say they "rethought" their strategy about retaining some direct-op sites after seeing the success achieved by jobbers and joint venture companies who have acquired stations from the company over the last couple of years.

The company will not say how much jobbers have hiked volumes and grown retail networks since buying direct real estate, but does say that the average Shell wholesaler moves 72,000 gals/mo, compared to the 145,000 gals/mo sold monthly at the average Shell direct outlet.

"There has been a lot of success in bringing on new volume through
market sales and new-to-industry construction," says one official. Volume
is up approximately 2%-3% over 2006 levels so far and, at 11.5%, Shell's
brand share is the highest it has ever been, according to data from
market research firm NPD.

September 11, 2007
Shell Set to Sell Key Northeast Market to Jobber

After protracted negotiations, Shell is about to finalize the sale of its
company-owned stations in Philadelphia and southern New Jersey to a subsidiary
of Arfa Enterprises, Oil Express learns.
  
Arfa will acquire approximately 52 sites, plus supply contracts for two open
dealers, say marketer sources. The stations move more than 90 million gals/yr
and comprise about 30 sites run by multiple-site operators and 22 dealer-leased
units, sources say.
  
Arfa is based in Pennsauken, N.J., and owns about 180 sites. It moves 170
million gals/yr, says company president, Alex Prahkin. The firm is a multi-
branded marketer and is among the largest wholesalers in the U.S. Its brands
include BP, Exxon, Gulf, Citgo, LukOil, Shell, and a private flag, Astro.
  
Prahkin declined to comment on the reports of an imminent deal with Shell.
However, marketer sources say Arfa will make the purchase through a subsidiary
called Bronson Holdings and should take over the  outlets in October under a
long-term Shell supply contract. Shell's standard sales contracts require a 10-
15 year supply commitment.  
  
Arfa was set up by Russian emigre Semyon Logovinsky. In 2001, he sold his
stake to Prahkin, the son of his former business partner Miron Prahkin, in
order to become wholesale  and business development VP for Russian refiner
LukOil USA (OE 02/19/01). Ukrainian-born Oleg Aliferov is the company's VP and
COO.      
  
Shell will not discuss the pending deal, but it has been trying to sell the
outlets for the past year.
  
A dozen jobbers initially bid on the sites, including fast-growing LeHigh
Oil & Gas, owned by marketer Joe Topper, as exclusively reported (OE 11/27/06).

September 4, 2007
Shell Tries New Wrinkle - Discount for Credit at Pump

Shell is offering consumers a discount for credit as part of a market test just launched in Boise, Idaho, Oil Express learns.

The test is set to run until Feb. 28 next year at approximately 70 stations. Customers who use the company's proprietary Shell Oil card to buy fuel receive an immediate 3cts/gal discount.

"This is not a rebate the consumer will have to wait to see on their card statement - they will see the price per gallon roll back at the pump the minute they swipe their card," says a Shell exec. The discount amount also will appear on the transaction receipt, just in case consumers do not notice the price changing at the dispenser.

Shell can instantly lower the per/gal price because of new Verifone software, known as REEP, installed at the stations. Shell offers the software free, with wholesalers paying only for the installation.

With REEP, a marketer can recognize an individual customer from his card account number and tailor promotions especially for him, such as fuel discounts, free soda, or a low-priced carwash. He can also issue coupons for future discounts or opt for pre-set messages that tell the customer of other offers, such as the Shell MasterCard 5cts rebate.

Tests of REEP in Houston, Las Vegas, Denver and L.A. have shown an 8% jump in premium sales, a 10% hike in store purchases, and a 25% boost in carwash income, as exclusively reported (OE 03/23/07).

Since there's no fee on Shell's proprietary card, execs say the 3cts discount should be a boon to marketers and may even spark a move away from Visa and MasterCard to Shell plastic. To support the test, Shell has issued POP for stations, and is running print and radio ads.

The pilot program is part of a multi-pronged test to determine not only what it takes to get a consumer to open a new account but also how to keep that customer an active and loyal shopper.

Meanwhile, Shell is extending its temporary fee break on bank and credit cards through the end of September.

August 24, 2007
ExxMob Shows Heart, Gives Marketers 2 More Years to Finish Upgrades

In a move that surprised some jobbers, ExxonMobil will give customers an extra two years to complete their Gemini image upgrades. It originally slated Dec. 1 of this year as the deadline for the upgrades and now won't expect completion until Dec. 31, 2009, it said in an Aug. 20 memo.

"ExxonMobil is aware that difficult market conditions, increasing costs, and continued margin pressures have impacted the financial ability of many distributors, as well as their dealers, to complete their Gemini image upgrades this year," it said.

The memo, while granting lenience, still advised marketers to complete the upgrades as quickly as possible.

"As we focus on highgrading and elevating the overall Exxon and Mobil brands, we feel that completing these upgrades is the cornerstone to improving our overall image and the longer-term resiliency of your sites," it said.

ExxMob will continue to offer the Image Enhancement Program and the Upgrade option in the Brand Incentive Program, it said. It reminded marketers that whether a site is upgraded or not may impact their participation in future marketing programs.

One jobber said he didn't see the delay coming.

"I guess there must have been a large number of sites that were not going to make the deadline and Exxon did not want to call their bluff on having to threaten de-branding," he said.

ExxMob could not be reached at presstime.

August 21, 2007
Southwestern Jobber/Retailer Sees Earnings Jump

Corpus Christi, Texas based Susser Holdings posted strong second quarter
earnings yesterday, thanks to higher retail margins and a boost in merchandise
sales. The company went public last Fall at about $16.50 per share and
ultimately traded above $20/share, but like many equities, it has slumped
recently with the overall market. It traded at $14.80 after the earnings hit
the street Wednesday.
  
Last Fall's initial public offering (IPO) was spearheaded by the earlier
purchase of a substantial portion of the firm by the private equity firm
Wellspring Capital Management. Other private gasoline marketers have
subsequently watched Susser's performance, wondering if a marriage with private
equity might represent a road to public markets, and access to capital for
greater growth.
  
Most of the company's holdings are in c-stores near Brownsville, Corpus
Christi, Laredo, and McAllen, Texas. Retail margins for the quarter advanced to
17.2cts/gal, up from 15.4cts/gal a year ago, but wholesale margins shrank
slightly from 5.9cts/gal to 5.3cts/gal. Retail volumes rose to 106.6 million
gal, with legacy sites sporting an average volume increase of 3.2%. The company
has a c-store count of 329 and has seven sites under construction that should
be completed this year.
  
Net income improved to $6.3 million from $3.8 million a year ago, thanks not
just to better margins but to an 11.8% gain in merchandise sales.

August 16, 2007
Crown Brand Lives On; Licensing Deals Offered to Jobbers, Dealers

Crown Central Petroleum Corp. was a thriving refiner and marketer in the Mid-Atlantic and Southeast until it fell on hard financial times a few years ago.

The firm sold all of its retail and refining assets in 2004-2005.

Today, a new Crown has emerged.

The 85-year old former company is trying to carve a wider place for itself in the arena of brand licensing, a business it's dabbled in since the asset sale.

Now known as Crown Central LLC, the company, based in Maryland, is offering dealers and marketers nationwide the use of its brand names - Crown, Fast Fare, ExpressMart, and Zippy Mart - in exchange for an annual licensing fee.

The yearly fee ranges upward from $1,575 per unit, to as much as $8,000, depending on location, and the number of units involved, said the company.

Agreements with flexible terms of up to 10 years, with renewal options, are available. However, Crown says that there are no strings attached and the licensee may walk away at any time.

Parties that sign an agreement must commit to using the Crown credit card processing network, at rates that the firm bills as "competitive," and are obliged to buy quality fuel from a pre-qualified supplier.

At the licensee's option, Crown will either provide a list of suppliers or the licensee can choose its own, Crown says. Distributors that have not licensed retail stores with Crown pay the firm an annual fee of $2,500 to sell qualified fuel to licensed stores.

Crown describes its program as a flexible, affordable  alternative for those that want a known brand without long-term supply/amortization contracts.

Separate from Crown's, other brand licensing programs are offered in the market under the brand names Clark, Liberty, Spirit and Pure.

On average, Crown licensees will incur a cost of $10,000 to $20,000 per station for a basic rebrand, it says.

However, the licensee is responsible for maintaining image and operations standards.

Crown has no proprietary credit card offering though it says one is in the works. It offers a fleet services card.

Program financing is available for rebranding, upgrades and equipment purchases (dispensers, store equipment, car washes, etc.)

Interested parties can call Crown Brand Licensing at 410-659-4841 or e-mail Branding@crowncentral.com.

August 14, 2007
Study Says Hypermart Growth Slows, But New Entrants Could Loom Large

A new study that will be released by Energy Analysts International (EAI) confirms what some marketers have recently witnessed in their own hamlets and counties: the rate of hypermart growth in the gasoline business has slowed appreciably in the last few years.

EAI mentions site saturation, capital spending reductions, and zoning restrictions as major contributions to the slowdown. However, the Colorado based analysis team stresses that hypermarts now represent a 10% share of the overall U.S. gasoline market, and suggests that that share could expand to 13% in 2012, and to as much as 15% if some on-the-fence chains decide to enter the motor fuel sales arena.

Five years ago, hypermart builds were proceeding at a rate of 700 to 800 per year, led by chains such as Wal-Mart, Sam's, Costco, and BJ's.

The more recent rate has been about 340 sites per year. Most areas of the country have shared in the slowdown, with the exception of the Southeast, where new builds have increased. EAI's previous benchmark study in 2005 showed the highest rate of expansion to be in Texas and other Gulf Coast states, but those areas may have "hit the wall" and growth is now stagnant.

Since the 2005 study, at least 15 additional companies have rolled out fueling sites, although some have been dabblers more than dedicated believers in a fuel sales strategy. In all, there are now at least 79 companies out of the fueling mainstream (warehouse clubs, department stores, supermarkets) that have at least one fuel site. The most active new hypermart subset has been regional supermarket chains with less than fifty stores. Collectively, this group operates about 200 fuel sites among a universe of 646 stores.

That diversity is an exception to the dominance that is the U.S. hypermart arena, however. Seven companies control over 80 percent of the U.S. hypermarket gasoline market and about 8 percent of the overall gasoline market as of second quarter 2007. But a few of these seven hypermarket majors do not appear to be rolling out new fueling locations.

The coming attractions in hypermart rollouts may come from a different sector. EAI estimates that there are 19 companies that have very limited fueling sites, or have just now entered the business. Among this group, there are about 9,000 store sites that could see fuel if alliances are forged with jobbers or retailers. A full-fledged rollout in this sector could add 1,500- 2,000 fuel retail sites that together could attract 4 billion gal/yr of fuel sales.

Some other observations of the EAI study:

Note: The complete EAI study in numerous formats, and with additional data sets, is available from Energy Analysts International in Westminster, Colo. Interested parties can phone 303-469-5115 or contact Mr. Joseph Leto, at jjleto@eaiweb.com for details.

July 24, 2007
BP to Withdraw from Four States, Will Compensate Marketers

BP will withdraw from three markets as part of a plan to focus fuel supply operations on "core areas", where it has a strong market position and proprietary fuel supply.

Marketers slated to lose the BP flag are in Texas, Louisiana, Wyoming and North Dakota, where BP says it will end fuel supply operations by April 2008. BP has no proprietary terminals in those states, but must rely on exchange or rack purchase deals. The four markets supply less than 2% of BP diesel and gasoline sales in the U.S., yet account for about 35% of the company's supply run-outs.

The market pullouts will affect approximately 350, or just under 3% of BP's 13,000 branded stations in the U.S., the company says. It will now work with the impacted jobbers to develop what it calls "transition plans."

"Where possible, BP jobbers will be supplied by a terminal operated by BP," the company told marketers today.

BP says it is giving marketers longer than eight months to debrand the affected stations, exceeding the minimum 180-day notice required by the Petroleum Marketing Practices Act. 

Jobbers who want to decide to debrand sites early can do so if they sign a mutual cancellation agreement with BP and give the company a minimum of 30 days advance notice.

BP says it will pay the affected jobbers all incentive funds due on sites that need to be debranded until April 1, 2008, or until sites are debranded, whichever is sooner.

If will also lift gasoline deed restrictions on any site that needs to be debranded and which BP may have previously sold to the marketer with a restrictive covenant for BP-only fuel sales.

Additionally, BP will reimburse jobbers $2,400 for each site that needs to be debranded - provided that the marketer had installed BP's Commlinx communications system at the unit. It was not immediately clear whether debranding costs will be reimbursed for other sites.

BP also will pay a $3,500 per site "de-image allowance" to marketers who decided not to convert a BP site to another brand, and will forgive any outstanding image incentive or marketing assistance plan funds.

BP says it will continue to market on the West Coast, and in the Midwest, Southeast, Mid-Atlantic regions, as well New York and New Jersey, where it has an advantaged refinery and terminal network. 

July 17, 2007
Delek Acquires Minority Stake in Lion Oil

Delek US Holdings, Inc. has signed agreements with several shareholders to acquire a 28.3% stake in Lion Oil Co. for $65.4 million. As part of the deal, Delek also will issue 1.91 million shares of its common stock to TransMontaigne, which is selling its 18% interest in Lion.

Lion operates a 75,000 b/d refinery in El Dorado, Ark., along with three crude oil pipelines and two products terminals in Nashville and Memphis, which currently supply Delek's 188 C-stores in the two markets.

The Lion Oil assets "fit well with our operations, and we expect this investment to immediately enhance the earnings of Delek," said Uzi Yemin, CEO of Delek US.

The deal also establishes a relationship between Delek and Morgan Stanley Capital Group, parent company of TransMontaigne, and "we look forward to future opportunities to work with them," he said.

Delek US is a subsidiary of Israeli-owned Delek Group. It also owns the 60,000 b/d former Crown refinery in Tyler, Tex., and products terminals in San Angelo and Abilene, and has made no secret of its desire to expand operations in the Southeast.