We have just completed our NPN MarketFacts 2008, and in a change of direction this year the full publication will only be offered for sale, at an affordable price, while various highlights will be presented in this issue of the magazine including the inaugural “NPN Readership Survey.”
The centerpiece of MarketFacts is the annual station count. This has already generated interest in the media, with preliminary data being supplied to the Wall Street Journal, Associated Press, Detroit News and a variety of others looking to document the impact current fuel prices are having on the industry.
The annual station count dropped by slightly over 2,500 from last year’s count bringing this year’s total to 161,768. This is in line with the continued, but increased consolidation in the industry observed in recent years. Although current market pressures, such as the high price of gasoline and inflation, are negatively impacting industry profits and sales, so far the impact is not being felt notably on the ground, and this year’s drop is actually less than seen in 2007. However, anecdotal evidence suggests that the 2009 count may show more impact. The full results can be found on page 26.
Among other highlights, ExxonMobil maintained its No. 1 position in total gasoline sales in the United States. The company reported that it sold over 24.5 billion gallons of gasoline, a relatively small growth in 2007 of 0.2 percent. Royal Dutch Shell continued to stay in the top spot for total amount of assets in 2007.
The cost of NPN MarketFacts 2008 is $249; NPN MarketFacts 2008 with companion CD is $299. Shipping and handling is $5.95 (U.S.); $7.95 (Canada, Mexico). NPN MarketFacts 2008 and NPN MarketFacts 2008 with CD can both be purchased at www.NPNweb.com or by contacting Shawn Christopher at (847) 720-5612 or firstname.lastname@example.org. Bulk orders are also available.
NPN Readership Survey
To mark 2008, NPN has added an industry readership/viewership survey in which we take a snapshot of the industry (marketer and retailer) and examine some of the more pressing concerns. While not exhaustive, we feel the information is useful and fairly representative.
We received over 150 solid responses and the demographic questions suggest that the respondents represent a fairly diverse cross-section of the industry both geographically and in regards to the scale of their businesses. For example, 18% classified themselves as pure jobber/marketers; roughly 31% as pure retailers; and roughly 51% as jobbers/marketers that also operate their own retail sites.
Geographically, the responses were fairly evenly divided among the major regions with a slight weighting towards the Midwest.
Where branding was concerned, roughly 32% provided some form of private brand; with the major oil companies coming in at 23.5% for BP, 18.3% for Conoco Phillips, 18.3% for Shell and 14.8% for ExxonMobil. Among refiner marketers, CITGO was represented at 13.9%.
It should be noted that all figures were rounded up 1/10 of a percent (with the exception of fuel margins), and because of the rounding process some results might total off several tenth of a percent from 100. Of course, some of the more open-ended questions will not total 100 percent.
For the marketer/jobber respondents, the majority tended to supply less than 50 sites (84.5%) with 46.6% supplying five or fewer sites. This can probably be accounted for as retailers who take on their own fuel supply in house, but do not operate as either a traditional jobber or a dedicated/exclusive convenience retailer. In 2009 we will work to add more clarity to this area. Slightly over 10% of respondents supplied 51 to 200 sites and nearly 2% of respondents supplied up to 2000 sites.
Marketer Fuel Offerings
Among the respondents that indicated they operate their own fuel supply operation, all sold gasoline and for roughly 44% it made up half or more of their sales volume. On-road and off-road diesel filled out the majority of the rest and 23.6% supplied some form of aviation fuel. Some 42.1% responded that they supplied heating oil.
A clean half of the respondents did not offer any form of cardlock operation, with the majority of the rest (roughly 43%) operating between zero and five cardlock sites. Roughly 7% operated over 10 cardlock sites.
The average fuel wholesale gross margin ranged from $0.90 down to $0.1, with an average of $0.16. The average wholesale net margin ranged from a high of $0.75 down to $0.0025, with an average of $0.07. This would seem to again reflect the diversity of the marketers in the survey who ranged from fairly large, dedicated supply operations to fairly small retail marketers.
For all of the focus on biofuels in recent years, 40.4% of respondents still do not provide a biofuel even in one of the common blended forms. As could be expected, among the rest roughly 30% supply some form of ethanol blend such E-10 and nearly 37% provide some form of biodiesel blend that could also include a biodiesel-based heating oil. A surprisingly robust number of respondents (19.3%) supplied E-85, and given some of the impediments that are in place to blending at the marketer level, an unsurprising 3.5% provided pure ethanol and 7% pure biodiesel.
Fuel Storage and Delivery
A key component of any marketer operation involves storing and delivering fuel to the customers. Roughly 51% of respondents operated their own bobtails/10-wheelers for mobile fueling, etc.; a similar 51% operated their own semi-trailer tanker trucks; roughly 52% used a common carrier for at least some of their product distribution; and only about a quarter used a common carrier for all of their supply distribution. Where deliveries are concerned, 35.1% take advantage of a specialized dispatching/routing/driver communications system. Some 53.6% offer their customers a “keep it full” program. Some 59.6% of respondents operated their own bulk plants.
Although the impact of the futures market is being regularly cited as having some impact on current crude prices, where the hedging of refined products is concerned, relatively few in the industry (32.1%) take advantage of this risk management tool. However, a clean 75% use some form of online pricing and purchasing technology showing that the industry has moved some extent beyond the telephone, fax machine, pencil and note cards that used to define finding the best cost at the rack in a given day. Given the extreme price volatility and the extraordinary cost of inventory, the move to technology is certainly not unexpected.
As might be expected, among marketers and jobbers the most pressing issues of the day involved current fuel prices, the state of the economy and the availability and reliability of supply. However, while SPCC regulations, brand issues and biofuel mandates were not the most pressing concerns, they are still notable issues to many respondents. In spite of the economic challenges, it’s encouraging that roughly 84% of respondents see their operations either expanding or holding steady in the coming year.
On the Retailer Side
Retailer respondents included both dedicated retailers and marketers that also operate retail sites. As might be expected, the majority of retailers operated five or less sites (78%) with 2.4% of respondents at the higher end of the scale operating between 100 and 200 sites. Some 58.8% of respondents had no leased or franchised sites and some 14.9% of respondents had no company operated sites. Some 17.6% operated 91-100% company operated sites, while some 5.9% leased out between 91-100% of their sites. As noted earlier, the retailer figures include pure retailers and retail sites operated by jobbers/marketers.
The Fuel Product
Of the respondents that had an annual fuel volume of between one half-million and 2 million gallons per year, per site, the majority of sites had between five and eight fueling positions. The average gross margin ranged from $0.25 to $0.04, with an average of $0.13. Where the net margin is concerned, the high was $0.20, the low $0.005 and the average $0.05 per gallon. A notable disparity between the high-end and low-end is likely covered by the fact that some retailer respondents operate fewer than five sites while others are larger jobber/marketers with notable economies of scale.
Retailer respondents offered a wide range of ancillary profit centers to offset the current lackluster performance of fuel as a major profit generator. As could be expected, c-store sales, foodservice, tobacco, beverage and spirits were high on the list of important profit centers. Showing the diversity of the industry, each profit center (with the exception of phone cards) figured in to being the most important for some percentage of operators. Some 24.7% of respondents had sites that offered automotive service, yet only 35.4% of those would be considered a single-site operator. A clean 24% offered lube service, 58% had at least one car wash at a site and 74% accepted some form of fleet card.
A variety of respondents operated some less traditional profit centers. These included: marine fuels; auto related items like oil, injectors, windshield water; dairy/ice cream; hunting/fishing licenses and supplies; payday loans; U.S. post office; mini-warehouses; tanning salon; utility bill pay center; candy novelties; motel; and nitrogen. Of course, propane and lottery sales were on the list.
The retail petroleum industry is anything but boring, and today’s market is certainly filled with a variety of challenges. The survey took a look at what some of the major concerns were among retailers, it was no surprise to see credit card fees at the top of the list (67.9%), followed by the related area of fuel prices (60.2%) and the old favorite, finding and retaining quality employees (47.4%). The general state of the economy was certainly a major concern, coming in at (44.9%).
Discounts and Loyalty
The impact of credit fees and other pressures on retail gasoline profit margins have led some in the industry to look for alternative payment and customer retention vehicles, specifically cash discounts and loyalty programs that can also offer an ACH component that works around typical credit fees. Some 31.2% offer a loyalty program and 31.6% a discount for cash.
A core issue for the industry is providing adequate security for both associates and customers. NPN Magazine decided to take a look at exactly what our readers are doing from a technology/equipment standpoint in this area. Slightly over half still used a CCTV/VCR solution at some of their retail sites. However, nearly 62% have made the move to digital surveillance technologies at some of these sites. Nearly 59% use some type of electronic cash handling safe, and nearly 34% use a cash handling service.