On July 14, ConocoPhillips announced its intent to reposition the company’s exploration and production and downstream businesses into two stand-alone, publicly traded corporations. The consumer-facing marketing businesses of ConocoPhillips will transfer to Phillips 66 and continue to operate under the brands Phillips 66®, Conoco®, 76® and JET®, as well as other specialty brands.
<i>NPN</i> interviewed Andy Viens, president of marketing for Phillips 66 and Mike O'Connor, manager of programs and brand image for Phillips 66 to see what these changes mean for the company’s downstream partners.
NPN: In a nutshell, what will be the impact for marketers and retailers?
Viens: (Marketing) is significant all of a sudden. One of the things as we went through is that year one we did not want to have any humongous changes or surprises out there in the marketplace. We look at the complexity of unwinding two companies after working for 10 years to achieve all of those synergies and we want to make sure we have smooth sailing for our customers the first 12 months out of the box and there's a lot of emphasis on that. Our customers can look forward to consistent billing, no errors, reliability of supply, having the same faces show up to knock on their doors and our programs are getting better all the time. We've gone from being the stepchild (of an integrated oil company) to being the only child. And we operate exclusively through marketers and resellers except for the one site that we'd operate in house.
O'Connor: We're all excited about being a pure downstream company. In one sense you don't have this large upstream business as a security blanket, but we should be a business that responds to the marketplace quicker and delivers better value to our customers.
NPN: What does a split mean for supply expectations?
Viens: The split, if you think about how it's occurred, should really not impact supply at all. But the feeling I get is that there is a greater emphasis on having reliable supply now and figuring out the best ways to do that, so that's been kind of a fun thing. We talk about customers a whole lot more than we used to, and the supply has a big exclamation mark after it now.
NPN: How do you view the relationship between branded and unbranded supply?
Viens: We've always had good branded and unbranded business and we want to serve both markets. I don't get so hung up on which channel we’re going through to get the market. I get hung up on having a good business partner to go to market with. On the branded side, we have some good offerings out there depending upon where you are, and we have the three different brands we can offer and we've got good programs. Unbranded is important in a lot of markets. We don't look at one as being better than the other—we always look to go with where the highest net backs are, obviously, like any company would.
NPN: What are you looking for in a partner?
Viens: It's really simple. We like people that know how to serve the consumer. At the end of the day, no matter what we have as programs, and whatever deal we might work out between each other, if they don't have something to offer the consumer and give them service and make them come back and buy from them, they're not going to do well. So we're looking for people that can service the consumer and that have the business acumen to make money and know how to run their businesses. It does not get really complex. And when you go out there, it's pretty easy when you walk into somebody's site to extrapolate why we'd be interested in doing business with them or why we wouldn't.
NPN: What other programs would be of interest to potential marketers and retailers?
O'Connor: We run our “Gas for Life” promotion and other incentives with the three brands, and we have our Kickback Rewards loyalty program, which will feature a drawing for a brand-new Corvette. We run the Phillips 66 Basket-Pong promotion for a $66,000 prize and hundreds of other instant prizes with the champion crowned during the semifinals of the Big 12 men's basketball championship. We have ticker promotions with the St. Louis Cardinals and the Los Angeles Dodgers that have been very effective. We have credit card programs with a lot of different payment options. Our fleet card program through Wright Express has been very successful and WEX has done a great job with their marketing following up on the leads we've generated. If you're new to brand we have very competitive programs to pull people in house and we've seen a lot of success with that over the last two to three years. And we have three great brands and were obviously selling top-tier fuels.
NPN: Do you anticipate any changes in positioning with three fuel brands you offer?
Viens: With the split, every sign out there has ConocoPhillips on it and that has to be removed and I think we have 36 months to do that in the agreement we signed with the IRS. So you'll see us out there changing signs. Currently, we like the three brands. Each of them has a strong heritage and a strong voice to consumers. Do we review our brand strategy? Absolutely. We do it on a regular basis and we do it pretty rigorously, and if we get into a marketplace that says something needs to change, we do that. But right now we like what we have, and I think we’re going to try to deliver strong brand value through those three brands.
NPN: What are you looking for in terms of network size?
Viens: At this point, we've seen production expand in our refineries and we want to place that securely so that the refineries have a ratable outtake. We also look every couple of years at what we’re doing throughout the system and what levels we have of integration and go back and figure out where the highest net backs are. If unbranded or branded can place the barrels at a higher net back, the barrels will flow there if we have the marketplace to do it. We see the demand instruction out there. Everyone would like to grow if they could release hold what they have seen the declining volumes. Do we have aggressive plans to go out and grow? Not at this point. But we continue to execute on our existing plans, which I think are pretty reasonable and help optimize the system and maximize the net backs to Phillips 66.
NPN: I've noticed you still have a fairly reasonable direct supply business.
Viens: We currently have about roughly 800 sites. On the West Coast we still have marketers, of course, but we have a very strong direct delivered basis in California, Oregon and Washington. We are seeking single-site and multi-site opportunities in all of our West Coast markets.