A tobacco man’s take on Home Depot Fuel

There’s no mistaking that Home Depot Fuel stores sell tobacco products, a marketing consultant who visited the stores told NPN MarketPulse in a recent interview.

“It just jumps out,” said Lou Maiellano, president of TAZ Marketing & Consulting Group, Levittown, Pa. Maiellano, former national tobacco category manager for Sunoco, said that two Home Depot Fuel stores that he visited in the suburbs of Nashville, Tenn., in March “clearly gave tobacco an emphasis. From outside, at night, the cigarette message jumps out clearly, letting you know, for instance, that they sell Marlboro, Copenhagen, Skoal.

“They’ve invested up front,” Maiellano added, in lighted headers and in custom fixtures with light boxes that add merchandising punch to the presentation of the category. “They did a very effective job of using the light boxes to call out the brands that they want to sell,” Maiellano said.

The 16-foot linear set included 12 feet for cigarettes and four feet for other tobacco products, Maiellano estimated. The size allowed for the use of the light boxes without sacrificing too much on space for product, he said.

He termed the pricing “competitive,” with a three-pack marketing program.

“I’m sure they’re going to evaluate the business and make some changes,” Maiellano said, referring to the tobacco presentation, “but it’s only normal that you would do a set and then take a look at it” for possible adjustments.

“They did a great job in honoring the tobacco contracts’ signage guidelines,” Maiellano added. “In so many locations you’re greeted with all these tobacco signs, but they did it in a non-offensive way – no overkill.”

The Home Depot has been running a pilot program of the Fuel stores, which are petroleum/convenience sites located in the parking lots of selected Home Depot stores.

Home Depot has said that the Fuel stores are drawing contractors and other consumers more or less evenly, and that was Maiellano’s observation, too.

“It didn’t seem to me that it mattered that [the store] was on a Home Depot parking lot,” Maiellano said. “There were just a lot of folks, and they were contractors and they weren’t contractors.”

In a presentation to analysts more than a year ago, Frank Blake, then the company’s executive vice president of business development and operations, said that if the concept was deemed a success, the retailer would open 300 Home Depot Fuel stores over five years. Each station would be expected to ring up from $5 million to $7 million in sales annually, Blake said then.

Early this year chairman and CEO Robert Nardelli resigned amid a furor over his compensation. He was replaced in January – by Blake. Although no announcements have been made regarding the future of the Fuel format, Tony Wilbert, a spokesman for Home Depot, said in an interview in March, “We have a new CEO, so now of course these plans are being reviewed. It’ll be up to the new CEO whether he wants to move as aggressively as Nardelli wanted to.”

But that doesn’t mean the project is in limbo, or anything close to it.

“We are moving forward with two more,” Wilbert said. One of those locations is in Greensboro, Ga.; it will be followed by another in Tennessee, according to Wilbert. Once those two open that will bring the total number of Fuel stores to six.