2023 FUEL LEADERS
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EDITORIAL
Keith Reid Editor-in-Chief (847) 630-4760; kreid@fmnweb.com
Ben Nussbaum Editorial Director (703) 518-4248; bnussbaum@convenience.org
Leah Ash Editor/Writer (703) 518-4240; lash@convenience.org
CONTRIBUTORS
Denton Cinquegrana, Brandon Gormley
DESIGN MX www.themxgroup.com
Cover image by Ponkrit/Shutterstock
ADVERTISING
Ted Asprooth (847) 222-3006; tasprooth@convenience.org
PUBLISHING
Stephanie Sikorski Publisher (703) 518-4231; ssikorski@convenience.org
Nancy Pappas Marketing Director (703) 518-4290; npappas@convenience.org
Logan Dion Digital Ad and Media Trafficker (703) 864-3600; production@convenience.org
EDITORIAL COUNCIL
RETAILER/MARKETER MEMBERS
Mark Fitz, president, Star Oilco; Derek Gaskins, chief marketing officer, Yesway; Brian Renaud, director of retail fuel pricing and analytics, Sheetz; Scott Minton, director of business development, OnCue Marketing
VENDOR/SUPPLIER MEMBERS
Regina Balistreri, director of marketing, ADD Systems; Joe O’Brien, vice president of marketing, Source North America Corporation; Kaylie Scoles, marketing director, RDM Industrial Electronics Inc.; Ed Kammerer, director of marketing and global product strategy, OPW Retail Fueling
Fuels Market News Magazine is published quarterly by the National Association of Convenience Stores (NACS), Alexandria, Virginia, USA.
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Contents © 2023 by the National Association of Convenience Stores. Periodicals postage paid at Alexandria, VA, and additional mailing offices.
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PUBLISHED BY
SPECIAL ISSUE 2024
Leaders
02 Methodology
Behind the 2023 fuel leaders rankings.
04
Another Potentially “Normal” Year
A look back at the fuel market in 2023 and what’sin store for the second half of 2024.
06
The Top 50 Fuel Brands
We look at the top 50 fuel brands that excelled last year in five key areas of success.
14
Top 5 Retailer Overview
The top 5 are familiar to most readers and have a ‘reputation for doing things right.’
16
What Top Retailers Do Differently
Brian Norris, Jeff Lenard and Keith Reid discuss findings from this year’s top 50 during a Convenience Matters podcast episode.
18
Insights on Fuel Pricing
The bar that continuously gets raised.
Behind the 2023 Fuel Leaders Rankings
The 2023 Fuel Leaders supplement published by Fuels Market News and NACS is based on data collected by Oil Price Information Service (OPIS) and drawn from hundreds of retail operations of all sizes throughout the fuel retailing industry. OPIS, A Dow Jones Company, tracks the performance of over 250 fuel retailers and ranks them in an annual report. Through a special partnership with OPIS, NACS is presenting a targeted subset of this data in the fourth-annual Fuel Leaders supplement to Fuels Market News Magazine. Analysts use the OPIS rack-to-retail margin methodology to estimate the
gross profit on a gallon of gasoline. While some chains may pay more or less than the posted rack, the OPIS methodology provides a reasonable metric for each chain.
OPIS also tracks the market share based on a third-party partnership with a company that tracks location information on tens of millions of cellphones in the United States through various mobile apps. OPIS geo-fenced all 130,000 stations (by hand) in the country to track the number of times a device visits a convenience store to provide insight into which sites are seeing the most potential customers. While there may be regional disparities
in smartphone usage, the relativity of visits between a site and its direct competitors is unprecedented. To bring the cell phone ping data more in line with fuel sales, OPIS only uses visits from devices that indicated they were in a moving vehicle during the trip, which eliminates pedestrian traffic from the counts. These cellphone ping data are used to calculate market share for each brand.
Getting the best estimate on each chain’s volumes starts with the monthly taxable gallon information reported on a state level by government entities. Analysts then apply market share to estimate total gallons by calculating each chain’s market share in the state against the total taxable gallons reported each month, and then dividing that number by the count of stations to offer an approximate monthly volume per site. Matching the estimated volumes to the margins shows total profit on gasoline sales and estimated profit per site.
Taking it all a step further, analysts study the data on a localized level, comparing a chain’s sites to the other sites in the communities in which they operate within a onemile radius. This information makes it possible to determine each brand’s market share against direct competitors. Researchers also calculate a head-to-head “winning percentage” by examining chain performance against competitors in the same community to identify which brand was more efficient. As an example, if “chain A” and “chain B” compete in the same 10 communities, and “chain A” was more
efficient (market share divided by outlet share) in eight of those communities, that would indicate that “chain A” had an 80% winning percentage against “chain B.”
OPIS ranks each chain in a variety of categories but weighs them differently based on conversations with industry insiders on what they felt were the most important metrics. Estimated monthly profit per site is rated the most important category, followed by total overall estimated profits. Other categories ranked include price differential, overall market share, local market share, margins, property values and more. The final overall ranking takes weighted ranking by category into consideration to determine the chains with the best performance.
Some chains in the report had thousands of sites with a huge multistate footprint, while others were small single-state operators with just a handful of locations.
As OPIS notes, “In summary, this report is our best answer to the question we are so often asked. While we may not be able to tell you with 100% certainty who the most-profitable fuel retailer is, or which convenience store chain or major brand is the strongest, this data-rich report is an excellent relative approximation from which many critical insights can be gleaned.”
The full OPIS report containing highly granular information on each chain is available for purchase from OPIS at https://www.opisnet.com/ product/pricing/retail-fuel-prices/ brand-power-ranking-report/
Getting the best estimate on each chain’s volumes starts with the monthly taxable gallon information reported on a state level by government entities.
Another Potentially “Normal” Year?
A look back at the fuel market in 2023 and what’s in store for the second half of 2024.
BY DENTON CINQUEGRANA
We’re less than halfway through the decade, but the petroleum market has already had just about everything thrown at it—a global pandemic that caused shutdowns and a demand spike when global economies reopened, plus an oil-producing nation attacked its neighbor when Russia invaded Ukraine.
Add the conflict between Hamas and Israel, which hasn’t had an impact on prices, but does highlight the fragile state of the world. Geopolitical tensions are still sky high as the first quarter of 2024 comes to a close. But even with the Red Sea effectively shut off for shipments, oil traders in the early stages of 2024 were quite simply
not chasing the market higher.
Even amid geopolitical tensions, OPEC+ carrying production agreements through the second quarter and a slow-down in non-OPEC 2024 supplies appear to be comfortable to this point.
Until there is an unplanned supply disruption, a significant price spike does not appear to be in the cards.
The Red Sea “re-routing” certainly has impending impacts, such as longer transit times and higher shipping costs, but that does not appear to be enough to move the needle price wise.
A DISCONNECTED MARKET
In 2023, West Texas Intermediate futures got as high as $95 per barrel
in September, after the low point in early May when prices dropped to just over $63.50 per barrel while there were major concerns surrounding small banks. A $30-per-barrel range between the high and low fits the mold of what can be expected in 2024—perhaps an even slightly narrower range is possible this year.
That is likely to mean a more stable gasoline market, at least in the futures arena, but spot markets are likely to become disconnected from futures. However, that is a common feature every year.
Those disconnects between spot gasoline and futures are usually a function of refinery issues, but they have started to become a bit more common around Reid vapor pressure (RVP) transitions.
In the past, the high RVP to low RVP transition was always a bit tricky but the past few years have seen the low RVP to high RVP transition take on a life of its own.
Not only do suppliers want to “give away” low RVP gasoline at a high RVP gasoline price, but the transition is also usually taking place as fall maintenance is getting underway. This has been an issue that has plagued
California in particular over the past two years, causing price spikes that have seen spot prices move to more than $1 over gasoline futures. This led to the state government issuing RVP waivers that ushered in high RVP gasoline earlier than normal.
THE ROAD AHEAD
Heading into the summer driving season, gasoline inventories are indeed lower than normal thanks to cold weather-inspired shutdowns this past winter and maintenance on the Gulf Coast. The East Coast continues to see supplies running below normal as well for gasoline, but the rest of the country is either just above or just below the seasonal norm.
Among events to keep an eye on—just like every year—is the Atlantic tropical storm season, as well as any storms that may enter the Gulf of Mexico with the cone of uncertainty aimed anywhere between Corpus Cristi, Texas, and Pascagoula, Mississippi. 2023 had an active hurricane season, but there were few storms that had any impact on oil and refined product infrastructure, with 2021 being the last year that there was a significant impact.
One thing is certain though: thanks to lower trading volumes over the past couple of years, volatility in gasoline and diesel markets will create feast or famine margin environments for marketers and retailers.
While there will be periods of low margins, the lows aren’t as low as they used to be. Retailers will have to keep prices higher to cover increased labor costs, credit card swipe fees and real estate leases and rents. These are not necessarily new factors keeping prices elevated, but they now seem to be
engrained in the fabric of retail pricing. OPIS has, for the past few years, argued that “30 cents is the new 20 cents” when it comes to gross rackto-retail margins. It may be time to acknowledge that 30 cents may have been a bit too low especially considering the margin environment in 2022 and 2023.
Annual U.S. margins in 2022 averaged 42.9 cents per gallon, the highest annual average on record. The gross gasoline margin for 2023 came in just shy of that at 39.4 cents per gallon. 2023 was on pace to at least match if not exceed 2022’s average, if not for some market strength in late November and early December that kept a lid on the gross margin.
As of mid-March, 2024 is shaping up to be a year that is close to the previous two with an average daily margin of roughly 34 cents per gallon.
Volatility is likely to persist in futures and spot prices, but without a significant supply event, a retail national average of $4 per gallon or more is likely not in the cards for 2024. Additionally, a slightly “cheaper” year for gasoline retail prices is anticipated with an average price in 2024 of $3.499 per gallon.
The 2023 retail average of $3.529 per gallon is well below the 2022 average and that likely contributed to the increase in gasoline demand to 8.944 million barrels per day. Like last year, there is likely to be a small uptick in gasoline demand—an annual average on either side of 9 million barrels per day is not out of the question, though that is still below the record for 2019.
With 2024 being an election year— not just in the United States but many other countries as well—be prepared to hear a lot about climate change and energy.
Geopolitical tensions are still sky high as the first quarter of 2024 comes to a close, but even with the Red Sea effectively shut off for shipments, oil traders in the early stages of 2024 were quite simply not chasing the market higher.
Denton Cinquegrana is the chief oil analyst for OPIS, A Dow Jones Company.
THE 2023
FUEL LEADERS
We look at the Top 50 fuel brands that excelled last year in five key areas of success.
By Keith Reid
The greatest change each year in the Top 50 fuel brands tends to be the order of the companies, with a handful dropping off or moving up. The companies on the list range from operators with over 6,000 sites to 31 sites. They are regionally diverse and go to market with a variety of formats, ancillary profit centers and key offers. However, for all their differences, they have figured out how to operate their fueling programs in a highly efficient manner, which is the goal of the OPIS Top 250 Retail Power Brand Report from which this 2023 Fuel Leaders article is drawn.
FMN takes the full report and focuses on five critical performance factors for the Top 50 brands. The full report provides more granular—and typically localized—detail in a number of additional categories and is available for purchase.
Our report (based on 2023 data) sees six companies enter the Top 50, with some making significant jumps from their positions in 2022: Tennessee-based Sudden Service (97 to 44); Ohio-based Duchess (65 to 50); Illinois-based Huck’s (78 to 46); Texas-based 7-Eleven (54 to 48); Kentucky-based FiveStar Food Mart (52 to 46); and Pennsylvania-based Country Fair (51 to 38).
As tends to be the case, the top five were consistent.
1. Pennsylvania-based Wawa (No. 1 last year)
2. Oklahoma-based QuikTrip (No. 2 last year)
3. Pennsylvania-based Sheetz (No. 3 last year)
4. Utah-based Maverik (No. 5 last year)
5. Wisconsin-based Kwik Trip (No. 7 last year)
LEADERS
SIZE, TOP 5 BRANDS
ECONOMY OF SCALE
VERSUS SPEED AND FLEXIBILITY
Economies of scale give the larger players in the industry a range of advantages such as favorable purchasing power, broader brand recognition and, often, greater cashflow/ credit and abundant staffing to apply to initiatives. Countering the economies of scale, smaller operations tend to have more flexibility to pursue opportunities, can be better focused on their markets compared with broader operations and can increasingly take advantage of powerful but affordable technologies that help level the playing field where efficiency is concerned.
The top five tend to be midsize chains (relatively speaking).
The largest retailers in the industry tend to have a home in the Top 50 but typically
fall in the middle of the pack. Overall, 64% (up from 56%) of the brands ranged in size from nearly 6,000 sites to slightly over 100 and included the top five performers. The remaining 36% ranged in size from 100 sites to 31.
The ability to operate efficiently regardless of size is illustrated by comparing the 10 largest brands with the 10 smallest. A perfect example is found at the extremes with Arizona-based Circle K (6,051 sites) and New York-based Delta Sonic (31 sites). The companies are ranked similarly—Circle K is only two points higher on the list at 28th.
Note: Figures in parentheses represent negative values.
PRICING STRATEGIES
The convenience and fuel retailing industry draws customers to its sites through a variety of offers. Operators look to differentiate themselves and win the market through foodservice, carwash, beverage programs and packaged goods—to name a few. However, the traditional traffic driver is motor fuels (though profit margins have varied considerably from decade to decade). NACS research has shown that consumers have a strong emotional attachment to the price of fuel and will often endure inconveniences such as driving extended distances to save a few cents. 2023 was no exception in a recent string of unusual years. Gas prices have remained relatively high after the drop-off during the pandemic, and volatility has been constant, along with solid retail fuel margins.
Efficient operations should have some headroom to adjust margins downward for market share if that is required or desirable. How have the Top 50 responded in their markets? All but one of the top five brands were priced lower than their market averages, and the outlier, Kwik Trip, was barely above market averages.
Among those in the Top 50 that priced above their markets, ExtraMile topped the list at 18.6 cents
COMMUNITY PRICE DIFFERENTIAL TOP 5 BRANDS
COMMUNITY PRICE DIFFERENTIAL HIGHER PRICE LEADERS
Some 56% (compared with 62% last year) of the Top 50 brands were priced below the average of their competitors in their markets.
Leading the list for a lower-than-market average price were Fastrip Food Stores and Rotten Robbie at 33.5 cents and 22.3 cents, respectively. Community price differential is based on all competitors in the same high school attendance zone.
ATTRACTING CUSTOMERS
The OPIS MarketSharePro for gas station data (an overall national gasoline market share based on visits to a chain’s properties through cellphone location tracking) shows the number of times a cellphone visits a convenience store, providing insight on which sites are seeing the most potential customers. This cellphone ping data is then used to calculate market share for each brand.
TOP 5 BRANDS MARKET SHARE
TOP 10 COMMUNITY MARKET SHARE
While the report is focused on many efficiency factors, as might be expected, scale comes into play with the total U.S. market share being dominated by the largest national retailers.
TOP 10 US MARKET SHARE
As you move into the narrower community and local market shares, scale becomes less important. The leaders from the Top 50 seem to have a dominant position in their markets. Local market share is based solely on visits to the chains properties.
Community market share is the same as the local market share but is based on competitors in the same high school district.
TOP 10 LOCAL MARKET SHARE
HEAD-TO-HEAD COMPETITION
A successful operator knows the competition and how well they stack up against them. But what are the true metrics in those competitive relationships? While OPIS provides them in a specific, detailed format for companies that purchase the full report, it did share some general head-to-head performance of the Top 50 operators. Head-to head performance represents the percentage of times a specific brand was more efficient in gaining head-to-head market share compared with individual competitors in its markets. This is a combination of both fleet and consumer business.
The top five brands truly show their competitive market leadership with efficiencies above 90% and a solid representation at the top tier of the category. HEAD-TO-HEAD EFFICIENCY
TOP 10 HEAD-TO-HEAD EFFICIENCY LEADERS
Keith Reid is editor-in-chief of Fuels Market News. He can be reached at kreid@fmnweb.com
TOP 5? WHO ARE THE
#1 WAWA
This year, the top five are brands that should be familiar to most readers, and they tend to have reputations for “doing things right” throughout their operations.
By Keith Reid
A privately held, family-owned company, Wawa’s roots stretch back to 1803, where it began as an iron foundry in New Jersey. Toward the end of the 19th Century, owner George Wood took an interest in dairy farming and the family began a small processing plant in Wawa, Pennsylvania, in 1902. The milk business was a huge success, due to its quality, cleanliness and “certified” process.
As home delivery of milk declined in the early 1960s, Grahame Wood, George’s grandson, opened the first Wawa Food Market in 1964 as an outlet for dairy products. Today, Wawa is an all day, every day stop for freshly prepared foods, beverages, coffee, fuel services and surcharge-free ATMs.
With just over 1,000 locations to date, Wawa stores offer a large fresh foodservice selection, including Wawa brands such as custom prepared hoagies, freshly brewed coffee, hot breakfast sandwiches, hand-crafted specialty beverages and a dinner menu that includes burgers and pizza along with an assortment of soups, sides and snacks. Forbes.com Ranks Wawa as #24 of America’s Largest Private Companies, #1 in Convenience Category for America’s Best Customer Service by Newsweek, #12 on Forbes 100 Halo List in 2022 and one of Forbes 2023 America’s Best Employers for Women and New College Grads.
#2 QUIKTRIP
QuikTrip Corporation is a privately held company headquartered in Tulsa, Oklahoma. Founded in 1958 by Burt Holmes and Chester Cadieux, QuikTrip has grown to a more than $11 billion company with over 1,000 stores in 17 states, employing more than 31,000 associates.
The convenience retailer began to sell gasoline in 1971 as states legalized self-service stations. In the early 1970s, QuikTrip co-founder Cadieux eliminated slow-moving merchandise from the stores’ inventory, such as canned vegetables, and stocked a larger quantity of items, priced low for high-volume sales, such as beer, soda, coffee, cigarettes and candy.
At its QT kitchen counters, customers can order made fresh to order food, premium specialty drinks and various frozen treat selections.
QuikTrip gives back to the communities it serves, donating 5% of net profits to charitable organizations in those communities. With more than 24,000 employees, QuikTrip has consistently been ranked as one of the top convenience store marketers in product quality and friendly service. #3 SHEETZ, INC.
Altoona, Pennsylvania-based Sheetz, Inc. was established in 1952, and is one of America’s fastest-growing family-owned and operated convenience store chains with more than 25,000 employees. The company operates over 710 store locations throughout Pennsylvania, West Virginia, Virginia, Maryland, Ohio and North Carolina.
Sheetz provides an award-winning menu of M•T•O® sandwiches and salads, which are ordered through unique touch-screen order point terminals. All Sheetz convenience stores are open 24 hours a day, 365 days a year. Recognized by Fortune as one of the 100 Best Companies to Work For, Sheetz is committed to offering employees sustainable careers built on an inspiring culture and community engagement. The company promotes its fuel quality and use of technology to ensure that the quality is maintained throughout the fueling infrastructure. In addition, the company markets diesel fuel, K-1 kerosene, E85 and E15 throughout its network. It has EV charging at 95 of its locations and recently passed the milestone of two million EV customers.
#4 MAVERIK
After saving up money from renting roller skates, Reuel Call opened his first ‘two pump’ gas station in 1928 in Afton, Wyoming. In 1964 Maverik expanded to Moab, Utah, and has kept growing to hundreds of stores, helped millions of people “gear up for adventure” and sold millions of gallons of gasoline. The company is committed to building “the coolest convenience-experience on the planet,” and that adventurous spirit fuels every operational decision.
In 2023, Maverik acquired Kum & Go, making the company one of the ten largest convenience retailers in the United States. The combined company will have more than 800 units across 20 states in the Midwest and Rocky Mountain regions. Under its Maverik brand, the company operates nearly 400 locations and growing across 13 western states—Arizona, California, Colorado, Idaho, Montana, New Mexico, Nebraska, Nevada, Oregon, South Dakota, Utah, Washington, and Wyoming.
Maverik is known for its premium BonFire food, made fresh in every store, every day, and values on fuel, drinks and snacks. Maverik sells exclusive products such as freshmade gourmet burritos, sandwiches, pizzas, cookies and coffee blends from around the world.
#5 KWIK TRIP
Kwik Trip/Kwik Star is a family-owned company that serves customers in Wisconsin, Minnesota, Iowa, Illinois, Michigan and South Dakota with 865 convenient, clean convenience retail stores. Kwik Trip also distributes more than 80% of the products featured in the stores, supplied by its own commissary, bakery, dairy and distribution center located in La Crosse.
The retailer offers seven grades of gasoline (including E85 and ethanol free); six grades of diesel and DEF; compressed natural gas, liquefied natural gas, propane and electric charging. Kwik Trip promotes its high-quality products, guaranteeing the quality of every gallon that a customer purchases.
In 2023, Kwik Trip was recognized by USA Today as the best gas station in the country for the fourth consecutive year. The company is also consistently recognized as a Top Workplace by the Milwaukee Journal Sentinel.
Brian Norris, Jeff Lenard and Keith Reid discuss findings from this year’s Fuel Leaders issue during a Convenience Matters podcast episode.
WHAT TOP RETAILERS DO DIFFERENTLY
By Keith Reid
Each year, NACS produces a podcast to discuss FMN’s Fuel Leaders issue. NACS Vice President of Strategic Industry Initiatives Jeff Lenard moderated the Convenience Matters podcast episode with Keith Reid, FMN editor, and Brian Norris, OPIS executive director of retail data and product management.
Reid has covered the fuel retail industry for more than 20 years. In 2013 he helped found FMN Media LLC, a multifaceted digital and print media company that focuses on the needs of petroleum marketers, retailers and commercial fuel buyers. The company was acquired by NACS in 2020 and he serves as the brand’s editor and editorial director.
Norris joined OPIS in 2005, working in a variety of sales and marketing roles before joining the OPIS Retail division. Over the last 12 years, his focus has been ensuring the accuracy and integrity of OPIS retail pricing, margin, market share, and volume data and helping develop the suite of OPIS Retail analytics products.
This interview has been shortened and edited for clarity. The full podcast can be found at conveniencematters.com/episodes and look for episode 445.
LENARD: WHY IS THE FMN’S 2023 FUEL LEADERS ISSUE IMPORTANT AND WHAT THE READERS CAN GET OUT OF THE DATA?
Reid: From a big picture standpoint, there are probably two main takeaway areas. First, this gives our readers a solid overview to benchmark their operations in a handful of key areas against the top 50 companies that have been identified as true leaders in the industry. You can go to the full OPIS report to get much more granular data beyond that. But this provides an opportunity to look at their peers nationally and any direct competitors that might be in their markets.
The second takeaway is that any company can be efficient and successful. You have some of the largest companies in the industry in the Top 50, such as Circle K with over 6,000 sites. Also on the list is Delta Sonic, which operates 31 sites, so you really get a mix. And the top five are usually somewhere in between that. What’s encouraging is the thought that you can be a smaller operator, but if you execute properly and take advantage of your staff live up to your mission statement, know the market and use technology, you can be just as efficient as any other leading company in the industry.
LENARD: WHEN WE LOOK AT PRICING STRATEGIES AND THE TOP 50, WHAT REALLY COMES TO THE FORE?
Norris: The most successful brands aren’t necessarily discounters. I think what they realize is that if they offer a fair price with a strong brand, there are other things that create customer loyalty. Is it a safe station? Is it well lit? Are the bathrooms clean? Can I go in and get a variety of things that I may need? That’s part of the value proposition that consumers are looking at when they’re determining where they go to fill up. Of course, the fuel price is important, and for some subsets of customers if you’re not the lowest price you’re not getting their business. There’s nothing you can do about that, but that’s not everybody.
These brands that are the most successful really figured out what that formula is for their brand.
You have some of these brands, Sheetz for example, that tend to be an average pricer in their market. The Wawas, the Maveriks and some of these other brands might be slightly discounted to the market average, but not super low. And then you have the Buc-ee’s of the world that are way below market average.
So, it really depends on the brand and what your position is in the market when you’re
determining that. Rotten Robbie’s, for example, they’re in the San Francisco Bay area. Their margins are still strong. California margins are very high. But that tends to typically be a dealer operated market where there are a lot of branded sites, and branded sites tend to be priced significantly higher than an unbranded site. They’re still making very healthy margins, but they’re very low compared to the market average because they’re an unbranded operator and they price at a discount. So a lot of it depends on where you are.
One thing I want to bring up that I think is important for the industry to understand is that there’s also the factor of what percentage of the customers’ monthly income or their wallet is going towards fuel, overall. When prices are higher, consumers are much more sensitive to who is cheaper, so I think brands need to maybe pay attention to that.
The most successful brands aren’t necessarily discounters. I think what they realize is that if they offer a fair price with a strong brand, there are other things that create customer loyalty.
A combination of these different data sets is needed to understand the overall volume picture. What’s my market share? Am I losing market share?
When Russia invaded Ukraine a couple of years ago prices that summer went through the roof. The national average ended up somewhere around $5. We saw in our market share data the way that the big box and grocery were just absolutely stealing market share from the traditional convenience space. And I think it’s because they realized that, okay, we’re the aggressive pricers here.
People are willing to wait in a line at Costco to save 30 cents a gallon when your prices are $5, whereas they’re probably less likely to do so when prices are $3.50. So, that’s an important part of the picture that I think some in this space don’t pay close enough attention to, as it’s not always just how you’re pricing against your competition.
Insights on Fuel Pricing
The bar that continuously gets raised.
BY BRANDON GORMLEY
Over the past 10 years, I have had the privilege to both manage and work alongside some of the industry’s leading convenience store retailers and their retail fuel pricing teams. During this time, not only did I learn to appreciate the various strategies retailers take to achieve forecourt success, but also the disruptions and volatility retail fuel teams face when trying to gain and keep a competitive advantage.
So, since we aren’t “returning to
normal” any time soon, it would be hard for me to contribute to this viewpoint without addressing some of the more impactful challenges fuel retailers face today. These include an evolving competitor landscape, wavering demand curves, uncertain margin environments, new technology and evolving consumer trends. And if these external challenges weren’t enough, the convenience store industry has certainly not been immune to the corporate mandate of “doing more with less.”
When it comes to competitor landscapes, it’s hard to find a day when there isn’t an M&A announcement, news that a brand is expanding into a new market or that a retailer is opening a large footprint store with a new consumer offering. All of these can drastically impact the competitive landscape for a fuel retailer, often with short notice. Retailers are forced to react and think differently, especially when it comes to fuel pricing strategies. This can often have a lasting effect on the volumes and margins in a market.
In terms of gasoline volumes, we are operating during a seemingly uncertain time. Less fuel-efficient vehicles are being traded in for newer, more efficient options including electric or hybrid models. The pandemic and the rise of remote/hybrid work have further accelerated this trend across the
United States in varying degrees. In fact, according to OPIS DemandPro, we are seeing figures down as much as 25% compared to 2019 levels for same store gasoline demand. These figures are forcing some retailers to make a strategic decision to benchmark performance not in terms of year-over-year volume, but in terms of market share growth—to compensate for these lower volumes, there is an upward trend in margins (cents per gallon). This doesn’t necessarily come as a surprise, however, what is unknown is if these higher margins are here to stay.
New technology and advances in data efficiency have acted as a windfall for more sophisticated fuel retailers. Information about competition, such as retail prices and consumer data, have become more readily available and can provide accurate data. This information, used well, can increase profitability at the pump exponentially. There has also been a recent shift in technology from back-end systems such as business intelligence, category management, inventory tracking and labor optimization, to consumer facing technologies meant to enhance the brand experience. In this vein, the fuel pump has certainly not been immune to loyalty platforms offering specialized coupons to customers for fuel discounts, which can have a drastic impact on how consumers make their fuel purchasing decisions.
This ultimately leads me to my last point, which is the evolution of consumer trends. Consumers are
the lifeblood of the convenience store business, so why not become experts in their transactional data? Consumers are not only engaging with convenience retail brands differently today than they were 10 years ago, but their expectations of what a convenience store is have also changed. It seems like every week, there is a new mobile app or a trending video that disrupts the industry.
So, what is the answer to these challenges? What are the best fuel pricing strategies to deploy during these volatile times? The short answer is that there are no silver bullets when it comes to retail fuel pricing. Every brand, every market and every season requires a unique strategy that enables both short term and longterm profitability. However, what separates industry leading retail fuel pricing teams from their peers is their obsessive nature when it comes to data and having an open mind for its utilization.
These retailers are using modern tools to test assumptions, learn more about their core customer, the markets they operate in, using data to determine the right competition and manage more efficiently through faster price execution. It is an investment that these retailers make in both people and technology, but they reward themselves with both market share and profitability in volatile environments. Simply put, these brands are raising the bar everyday by evaluating the best data, software and analytical tools to execute fuel pricing strategies more efficiently and effectively.
Retailers are forced to react and think differently, especially when it comes to fuel pricing strategies. This can often have a lasting effect on the volumes and margins in a market.
Brandon
Gormley recently joined OPIS in November of 2023 as a director of client success. Prior to joining OPIS, Brandon spent the last 10 years in the convenience retail industry, leading fuel pricing, merchandise pricing, and business intelligence teams. His experience with Cumberland Farms, EG America, and MAPCO provided him opportunities to refine skill sets in price optimization, data analysis, and team leadership to deliver top-line revenue growth.
Conference: October 7-10, 2024
Expo: October 8-10, 2024
Las Vegas Convention Center
early bird rate ends June 7
1,000s of products
430,000 Sq. Ft. Expo
1,200 + Exhibiting Companies
Meet new suppliers, reconnect with familiar faces, and explore cutting-edge products and services that can take your business to the next level.
The 2024 NACS Show is the must-attend event of the year for anyone in the convenience and fuel retailing industry.
