Petrogram - Winter 2011 - (Page 19)
Out & About THE INDUSTRY
Marketers Will Enjoy Greater Leverage with Their Fuel Suppliers
For integrated companies, there’s no doubt that upstream propels the business and downstream is viewed as an ugly necessity. Relinquishing retail brand control to the wholesale marketer sector is a logical extension of this reality. Push the product out where operationally appropriate and maintain image control with the least amount of investment and manpower. As this model unfolds and volume hurdles grow, leverage is inexorably swinging to the branded marketers. With a limited number of super-jobbers handling ever greater amounts of branded throughput, the oil companies are going to wake up some day and realize that the tail is now wagging the dog. When brand contracts come due and large geographic areas are handled by only a few marketers, generous concessions will be expected and made. The trend toward the super-jobber seems inevitable especially as smaller marketers working a dealer supply model continue to exit the business. But wait a minute; no one can ever accuse the oil companies of being ignorant or naïve about their strategic future, and losing distribution leverage is not something that they missed in one of their high level meetings. It could be argued that given these factors, and considering recent events like the splitting of upstream and downstream business units into separate companies, all of this is part of a strategic plan that is just beginning to unfold. Oil companies no longer have management that has any nostalgia for the good old days of motoring, and the last vestiges of the aurora of a brand and its value could be gone. Never mind what your sales representative says or what is professed in annual meetings; I doubt that these folks are privy to the real plan, anyway. Moving brand control to marketers is just another step down the road to final abandonment of the entire notion of oil company brand value or differentiation. Moving branded volume or unbranded volume will ultimately have the same importance and the concept of “losing leverage” is not something that really bothers them. They’ll find a profitable home for their crude oil in any event. I’ve been in the business now for over 30 years and have seen the emergence of the c-store from the traditional service bay emphasis, from direct oil company retail control to its current incarnation. It’s going to be fun to watch events unfold and see if my assessment ultimately comes to pass. If I’m correct, and if you are a marketer that primarily supplies dealers, then beginning to aggregate as many gallons as possible will ensure that you at least have a seat at the table. ❍ Possessing over 30 years of petro experience, Mark Radosevich is a strong petroleum industry advocate. In addition to serving on various industry association boards and committees, Mark is president and COO of PetroProperties & Finance, LLC, offering confidential mergers and acquisition representation and growth financing services exclusively to the wholesale petroleum sector. Contact him at 423-442-1327 or at firstname.lastname@example.org.
Mark Radosevich, PetroProperties & Finance, LLC
ack in the mid-90s I was part of a Texaco international study team tasked to determine the viability of a lube blend plant located outside Buenos Aires, Argentina. The plant was bleeding and we needed about 80,000 incremental barrels of volume in order to maintain operations. Headquarters’ management in Miami was adamant about finding solutions to turn the tide on losses that probably totaled around $500,000 annually. While winding down at the hotel bar one evening during the trip, I ran into a group of Texaco upstream guys who were ruminating about a couple of crude oil exploration dusters that they just experienced in the northern part of the country. In oil exploration lingo, a “duster” is a dry hole or a big miscalculation as far as crude oil discovery is concerned. When I asked them about the situation they mentioned that the misadventure cost the company tens of millions of dollars. It was at that moment that the difference between upstream and downstream in the oil business became crystal clear. My team was sweating losses of under a million dollars, while these knuckleheads just casually breezed through an amount that would have probably built two or three brand-new blend plants.
Table of Contents for the Digital Edition of Petrogram - Winter 2011
FPMA Salutes Its Patron Members
Insurance Issues: Fire Prevention
Advertisers’ Centerspead Marketplace
Regulatory and Legislative Update and Trends
Enviro Corner: Strategic Planning
Remember that Old Out-of-Date Word: Eligibility?
Out & About the Industry
Work Smart, Win Big on Property Taxes
Barrister’s Counsel 2012 – The Redistricting Session:
Index of Advertisers/Advertiser.com
Petrogram - Winter 2011