Not long after into the Deepwater Horizon oil spill crisis, rumblings began to arise over consumer boycotts of BP retail locations as a means of protest. These efforts, as is commonly the case, began on the Internet and eventually saw coverage in the national media.
In this case, a range of parties from BP and its marketer association to industry trade groups and the individual marketers themselves have been fairly successful in getting the word out that the local dealer or marketer is an independent business person and that a boycott would hurt that entrepreneur more than the brand partner. This has been aided by BP radio advertising efforts materials the company has provide its marketers to help get the message out to customers.
“There’s obviously dealer and jobber concern about consumer sentiment and what they are seeing in the media,” said BP spokesperson Linda Bartman. “What we’ve done to help our customers through this is to provide a Gulf of Mexico marketing package to give them tools to help them communicate to their communities that they are locally owned and locally operated and these materials help the consumers understand that the BPs that they go to are locally owned and operated and supply jobs to the community. I believe these have really helped with the negativity in the media.”
Specifically, BP is running a national radio campaign focused on the “locally owned” angle of its marker and dealer networks. It has provided marketers and dealers with support materials they can use at their sites to reinforce the message. Advertising materials (print, billboard and radio) are provided that marketers use in their markets (and at their expense) to reinforce this message. BP has made consultants available to marketers to help address concerns and implant strategies, and a financial component (volume allowances and reduction in credit card fees) is being offered to impacted marketers.
Locally Owned, Locally Operated
The locally owned messaging is well underway. “That message seems to be getting out rather well and it is accepted rather well and it is accepted in the local communities,” said John Kleine executive director of the BP Amoco Marketers Association. “People realize that here it’s been, day to day, but they had never considered that someone who had a BP nametag, shirt and sign was not a BP employee. And that is understandable they never thought that and would have had no reason to have known that.”
Even so, there has been a notable impact with figures ranging from a 10 to 40 percent loss in business. Conversely, some locations have seen no loss of business or have in fact increased business.
One impacted marketer is Jay Ricker, chairman of Ricker Oil Company Inc., headquartered in Anderson, Ind. Ricker Oil Company operates 49 stores including the BP Ft. Wayne market and the Indianapolis BP/ampm market. Ricker noted his sales have varied. Some sites are up, others are down about 4 percent and others have not been impacted.
“We have seen some sales declines,” said Ricker. “We have not seen any (demonstrations) at our stores and we haven’t seen a lot of negative conversations. I do think some people are voting with their feet and not coming in and I do think it is very demographic driven by those people in the more affluent suburbs who tend to be more socially conscious.”
Ricker has done his part to drive the locally owned message home to the customers. “We have tried to get the word out that these are all run by independent business people and that BP does not run these stores,” he said. “We have signs up at the pumps and in the stores noting that when people decide not to buy there, they are hurting the local community. We also note that we give to Habitat for Humanity and support Little League, etc. I’ve actually been out to the stores thanking our customers as the owner – I was actually out last week dressed as a clown. We gave them something and I got their attention. The comment I got back was, ‘Gee, I don’t think I’ve had the owner thank me for the business before.’ We did not specifically bring up the spill, but a few customers raised it, and it was all pretty positive with people acknowledging we are a locally owned business.”
Another marketer, Lynn Wallis, president and CEO of Wallis Companies - petroleum marketers supplying approximately 165 sites (multiple brands) in the St. Louis area, has also experienced mixed results. “In our market we have been fortunate in that we have seen some volume decline, but we can’t say it was across the board,” she said “We have tried to compare the impact on BP branded sites and other brands we operate in the same area and have not found conclusive results. I think a lot of that is a tribute to our dealer customers.”
As with Ricker, Wallis noted that there does seem to be some impact with BP sites in the more affluent areas where there might be more social consciousness. Wallis has reached out to the media and found it fairly knowledgeable about the ownership issue and sympathetic to the plight of dealers and marketers. She noted that marketers share responsibility in maintaining media and consumer relations.
The Gulf Coast area has seen the most direct impact on sales, for obvious reasons. With the well being capped and the story shifting to other domestic issues the pressure has started to lessen.
“I think sales are improving for most marketers now,” said Jim Smith, president and CEO of the Florida Petroleum Marketers & Convenience Store Association. “It hasn’t been much of an issue in the rural and suburban areas where people know that the sites are locally owned, but in the major metropolitan areas where you have a different brand on each of four corners it has been an issue.”
The “locally owned message appears to be sinking in at BP as well. For some time marketing and retail have seemingly been low on the list of priorities for the major integrated oil companies. This crisis shows that marketers and retailer are the direct link to both customers and influential public opinion. “I think there is an evolving cultural change within BP,” said Kleine. “It’s always been said that the customer (distributor) is really important but now there is real substance to that. The locally owned, locally operated campaign started with their customers saying there needs to be a face to this crisis and it ought to be a local face. And signage was created at the request of their jobbers and it was distributed quickly and has had a quick effect. And that stimulated the cultural change and we just have to see if it continues.”
Are Marketers Satisfied?
BP has pursued an aggressive response to the current crisis on many fronts from capping the well to supporting the cleanup efforts and the lost revenues of Gulf residents. It has, as noted, made some aggressive efforts to support marketers and dealers. But have they been enough? Smith noted that in his estimation, Florida BP marketers were, for the most part, not happy with BP’s response early on. “It seemed like it took too long to get out that the sites were locally operated, but it seems to be O.K. now – not great,” he said.
“You can always find people on both sides of BP’s response,” said Kleine. “I would say that BP started with the premise that they are going to be here for the long term and that we are committed to the United States, so judge us by our actions. They are putting resources behind this commitment, so I think that only time will tell if it works.”
One major point of contention has been the financial component. This is said to be 1 cent-per-gallon nationally and 2 cents-per-gallon in the Gulf region. Impacted marketers can also file a claim against the $20 billion fund the company has agreed to with the Obama administration.
“I think they’ve done a reasonable job, except on the financial end. I do not think the current program does enough, though it was a good first step,” said Ricker. “Financially (we) have all taken an impact. It’s not just at the pump, but inside the store. I talked to a good sized marketer in Florida, who is obviously impacted more than we are. We compared inside sales and both are down, but not as much as the outside sales. But, that’s a much higher gross profit margin.”
One concern for those carrying the BP brand is the long-term viability of the company. So far, the anticipated commitment to the crisis is $32 billion, though that could increase. BP states that it’s well prepared to meet the challenge, as its CFO Byron Grote told analysts on June 4th: Over the last four quarters we've generated $30 billion of cash flow and we've got further headroom in our gearing; we sit with 19 percent right now. And as far as pulling in cash beyond that to the company, besides the usual sources of short-term funding through commercial paper or utilising long-term debt capital markets, we've got over $5 billion of accessible cash sitting there today, we've got $5 billion in banking facilities and we've got $5 billion of standby lines beyond that. So we've got considerable firepower here to deal with any costs as they accrue and we will go forward using the tools that we have at hand to generate the funds to meet any liabilities.
The spill in the Gulf adds a relatively new, but serious consideration to the decision to go branded or unbranded. This not only applies to BP, but branding with any major oil company involved in exploration and production where a similar backlash might develop.
“Some distributors are trying to get out of the brand,” said Smith. “It sounds nice, but it’s not easy to do except maybe for those with renewals coming up. But Exxon bounced back (from the Valdez spill) and BP will bounce back. I just hope it’s not too late for some of those urban marketers.”
Would Ricker reconsider his BP brand relationship? “I think it gives anybody pause, because if you are unbranded you are obviously not impacted,” he said. “Now, there are contractual obligations we have all signed so it’s not something that you change rapidly. But, it’s also hurt us with our dealer network. As we’re signing up new dealers there is a lot of push back, and BP is going to have to do a good job of rebuilding the brand as we work through this.”