Selloff puts retail strategy in hands of ampm brand
                                                    By Angel Abcede
“Y...
Fiona MacLeod
president of BP U.S.
convenience retail
and Andrew Baird
vice president of marketing
and merchandising for a...
east of the Rockies have yet to under-
stand what differentiates the brand from
every other c-store in the market.
   “We ...
3)
                                                                                       snacks to carry in New Jersey,” ...
crowds. The options included baked
goods, paninis, chicken wraps and
design-your-own sandwiches with mul-
tiple types of b...
offer (see sidebar, p. 37). In the mean-
                                                                                 ...
were ultimately shifted to Montreal-
                                                       based Alimentation Couche-Tard...
The Roadmap
  L aying out the time frame and steps in BP’s transition to turn over its company-operated
    sites to a fra...
(according to NACS) on a $2-million           and they’re making 5 cents.”               pendent Oil Marketers Association...
In the larger scheme of things, the       arates the jobber and dealer classes of         option to explore, develop, prod...
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Selloff puts retail strategy in hands of ampm brand

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Selloff puts retail strategy in hands of ampm brand

  1. 1. Selloff puts retail strategy in hands of ampm brand By Angel Abcede “You can never have too much good aabcede@cspnet.com cashier asks if he needs help. The man stuff.” replies,“Where’s the cart?” That’s the catchphrase for BP’s satisfy his guilty-pleasure center. In the divestment of about 700 prop- ampm convenience-store brand. The As played out in one of its commer- erties and the turnaround franchising slogan refers to the targeted 18- to 35- cials, a male customer ferrets through of 500 to 600, some would say London- year-old male who walks into a con- an ampm gathering stuff. After search- based BP could possibly have too much venience store and finds everything to ing through the store for some time, a good stuff in downstream retail. But as 32 CSP A p r i l 2 0 0 8
  2. 2. Fiona MacLeod president of BP U.S. convenience retail and Andrew Baird vice president of marketing and merchandising for ampm What makes BP’s divestment differ- grow in certain markets, what other ent from those of majors such as Shell opportunities do you have but … sites and ConocoPhillips is that BP remains that already exist?” very interested in the retail future. And, For skeptics, the list of concerns perhaps more important, after invest- looks like this: ing millions of dollars in building a hip Brand Recognition. Will the BP Connect brand east of the Rockies, ampm brand score with customers BP is once again reworking brands, con- outside its West Coast comfort zone? fident the popularity of its West Coast And will BP successfully build brand banner will spread across the country. awareness in these new markets? “We did an extreme amount of The Money. Is BP offering a fair benchmarking and believe we have a very price after all is said and done, consid- competitive offer,” says Fiona MacLeod, ering the ongoing ampm royalties and president of BP U.S. convenience retail. 20-year fuel-branding contracts? And “We have a strong fuel-supply brand and just what allowances will be made if a history of [c-store franchising] with 900 certain properties won’t sustain a existing ampm franchisees. branded product or if historic volumes “But at the end of the day,” she show that other locations, possibly even acknowledges,“it has to be a win-win.” ones on premium corners, have not There’s no question that the poten- lived up to potential? tial exists. The planned sell-off, guided Class of Trade. Just who in the by NRC Realty Advisors LLC of Chicago end will be considered viable bidders? and expected to occur over the next year Will independents have a fair shot, or and a half to two years, in many cases do jobbers and industry consolidators means the land itself and properties in hold a favored position? significant markets including Atlanta; MacLeod and others at BP are stak- Chicago; Cincinnati; Cleveland; Colum- ing their reputations on ampm’s bus, Ohio; Indianapolis; Orlando, Fla.; growth appeal. But even MacLeod con- Pittsburgh; and scattered company-ops cedes that part of the “magic” lies in in five western states. finding the right operators. For some, it’s a no-brainer.“The best “We’re looking for the right fran- part about this is you know what the chisees, people who want to execute sales volumes are,” says Russ Scaramella [the program],” MacLeod says.“We’re of Arizona Oil Holdings LLC, Scotts- building relationships. … It isn’t a date; dale, Ariz., who currently runs 16 it’s a marriage.” ampm locations. “When you build or attractive as the potential appears for rebrand, you don’t have an idea what The Offer c-store chains, jobbers and independ- volumes are going to be. With a corpo- In many ways, ampm symbolizes a kind ent retailers to fatten their respective rate store, you have existing volumes.” of continental divide, with people west portfolios, one key question remains: Scaramella, like many other retail- of the Rockies having seen the light and Will BP’s discontinuation of BP ers researching the BP selloff, hopes to everyone east still in the dark. Customers Connect in favor of nationalizing its capitalize on what could possibly be a in the West hold a strong affinity for the West Coast ampm franchise model— once-in-a-lifetime opportunity. As one brand, having a tangible history and along with the accompanying set of Southeastern retailer who requested identification with the fun, indulgent ongoing fees—capture retailer interest? anonymity says, “If you’re looking to nature of the ampm experience. Those A p r i l 2 0 0 8 CSP 33
  3. 3. east of the Rockies have yet to under- stand what differentiates the brand from every other c-store in the market. “We are very excited,” says BP’s MacLeod.“All early indications are more than positive with a 20% ‘aided brand’ awareness already registering with very few converted stores east of the Rockies.” In addition, she says they’ve seen strong anecdotal evidence that cus- tomers recognize ampm as a distinct brand. The sentiments are summed up, she says, in a quote from a recent cus- tomer focus group: “The ampm peo- ple know more about food and the store; BP knows about the gas.” Andrew Baird, vice president of marketing and merchandising for the 1) ampm franchise, says the ampm brand builds on a sense of fun and edginess 1) Andrew Baird sinks his teeth into one of that appeals again to that youthful, ampm’s food offerings. indulgent consumer. 2) A full gourmet coffee bar stimulates foodservice sales. One of the more inventive com- mercials shows a group of guys build- 3) Energy drinks add kick to ampm’s proprietary-label program. ing a house out of corn-dog sticks, for 4) Fountain fun is part of the ampm culture. instance. Another promotional mani- 5) Brand transition should be complete by festation comes with the company’s summer of this year. “Too Much Good Stuff” truck, filled with life-sized balloons depicting ampm The franchise agreement com- snacks and stocked with giveaways. mits BP to spend funds on Inside the store, vibrant and action- national, regional and local adver- themed point-of-purchase materials tising; public relations and pro- also extend a sense of fun. motional campaigns; and other “Ask anyone who’s our customer, our programs designed to enhance 18- to 35-year-old male, where they go both image and patronage at fran- to indulge—they come to our stores, chise sites. “Our advertising, in sometimes five or six times a day,” addition to winning several awards, 2) MacLeod says.“They come to us for a also rates very highly in pretesting corn dog and then go home for salad that we run with sample audiences,” ronment was significant. with the wife and kids. This is who we she says. In addition to the strength of the go after.We target single-mindedly [the For franchisee Bob Juckniess of RWJ BP and Amoco gasoline brands, he demographic] at the site. Beer, chips, fast Management Co. Inc., Oak Brook, Ill., felt the c-store offer was better than food … and advertising that holds a who currently directs seven ampm sites that of the competition. “It has a mirror up to the customer. This is who in the Chicago area, finding a franchise unique blend of hot and cold food, they are; let’s celebrate it.” that can survive in a competitive envi- coffee, fountain and a promotional 34 CSP A p r i l 2 0 0 8
  4. 4. 3) snacks to carry in New Jersey,” Gilli- gan says.“Management of a c-store is really a local business, and the deci- sion was made that the closer man- agement is to the store, the more successful the business.” MacLeod agrees with the validity of the localized strategy, pointing to repli- cation of execution at the street level as 4) being the most difficult part of the company-op model. “When people say we’re getting out, I say we are in consumer retail to stay,” MacLeod says, pointing out that future growth will be with franchisees who are better connected to their local com- munities. “The company-op worked 5) well for our customer offer, but what’s hard to replicate is that link to the com- munity that someone who’s a local busi- The Why ness [person] has.” Marriage, even in the business sense In the end, she says the decision to that MacLeod refers to, comes down opt for one c-store brand in ampm and to trust. Figuring out where BP is one support structure in the franchis- coming from may allow retailers to ing paradigm boiled down to simplic- better assess the ampm offer and just ity. “We had multiple channels, brands how committed the oil company is and offers that meant cost and com- to supporting the franchise format. plexity,” she says.“It means we were not For many observers, the oil com- as efficient as we could be. From that pany’s development and eventual perspective it was easy to say,‘Let’s focus dissolution of BP Connect, its own on a single brand and a single offer.’” c-store brand housing its now- defunct Wild Bean Café foodservice How ampm Won Out concept, is testimony to a more local At the same time, BP felt internally that approach. ampm and the BP Connect concepts Localized strategies may eventu- were beginning to have more similar- ally befall all the majors, an immi- ities than differences. Hot food, foun- nent evolution brought on by the tain, coffee, core categories in beverages, calendar that’s attractive to the con- completion of the merger frenzy of 1998 snacks and tobacco existed in both with sumer,” says Juckniess, a veteran oper- to 2002, according to PMAA president little to distinguish one from the other. ator of Big Oil brands. “If you look at Dan Gilligan. That’s when the impetus The main difference centered on the franchise—safety, support, train- began for major oil companies to ease made-to-order foods. Rolled out in ing and ethical conduct—that’s where out of direct store management, he says. 2001, the Wild Bean concept had a spe- I [see ampm] has put all these things “The majors saw how hard it was cialized, upscale menu that targeted together.” to sit in Houston and decide what salty both the breakfast and lunchtime A p r i l 2 0 0 8 CSP 35
  5. 5. crowds. The options included baked goods, paninis, chicken wraps and design-your-own sandwiches with mul- tiple types of breads. Consuming roughly 40% of the company’s larger, 4,200-square-foot stores, Wild Bean stood as a formida- ble step by BP into foodservice—at one point the company even installed food-ordering kiosks as a way to facil- itate the wait in line. Building Winning Proposals For retailers interested in writing successful proposals for the ampm franchises offered up But as time passed, BP officials were by London-based BP, officials with NRC Realty Advisors, Chicago, have a few suggestions: seeing that individually prepared sand- Visit www.nrc.com/bp, which will have links to receiving property-specific packets, wiches stood as the final differentiator customer-service numbers and a list of cities hosting proposal seminars—at which between ampm and BP Connect and, attendance is strongly recommended. unfortunately, one that couldn’t stand Review all material carefully and thoroughly. In other words, do the homework needed as the linchpin of an entire c-store brand. prior to submitting a proposal. After conducting what MacLeod says Attend proposal seminars if at all possible. These sessions answer key questions and were numerous customer-segmentation walk potential buyers through the process. studies and even test sites with elements Line up financing early. Again, much of the work occurs prior to submitting an offer. of both Wild Bean and ampm food Formulate a solid business plan. It’s what any prudent business person would do. assortments, ampm appeared to hit Franchisors are looking for people who want to grow the business—people who are upon an essential piece that BP Connect interested in and capable, for instance, of building new sites. and Wild Bean did not. “What became more obvious to us was the desire to have hot food 24 what about the customer base that and of itself, did not meet our target cus- hours a day,” MacLeod says, pointing Wild Bean drew? tomer profile as fully as ampm. Plus, the out that customers used condiment “We did exit surveys and the feed- Wild Bean offer had limited hours as bars “as if it was their own kitchens.” back was that even though we might lose opposed to ampm’s expanded ones, Feedback showed that the 24-hour, the Wild Bean Café itself, we were still which allowed us to broaden our cus- hot-food and condiment-bar format, getting that Wild Bean customer plus a tomer reach. We also needed an offer with its relaxed, quick experience, is whole new customer base,” MacLeod that was simple for our franchisees to what the targeted segment wanted. So says.“Wild Bean, though a good offer in implement, as well as simple for our cus- tomers to recognize.” In the rebranding process, a number of components of Wild Bean were trans- formed to ampm, including gourmet “We’re looking for the right coffee, items baked on-site and“chilled- franchisees, people who want to to-go” offers.“The more complex and costly elements of Wild Bean, such as execute [the program]. “We’re made-to-order sandwiches, were dis- building relationships … It isn’t a continued. These sandwiches did sell and were popular with a certain seg- date; it’s a marriage.” ment, but our target customer wants a FIONA MACLEOD BP hot snack offer all day. Many of them A p r i l 2 0 0 8 CSP 37
  6. 6. offer (see sidebar, p. 37). In the mean- time, the different markets will undergo resets and signage changes to reflect the ampm brand. That timeframe has Chicago scheduled for completion by late winter, Atlanta by this spring, Orlando and Indiana transitioned by June and the stations in the Ohio and Pittsburgh markets done by July. BP is PROMOTION IN MOTION: looking at both jobber and direct-sup- A truck with “Too Much Good Stuff” extends the ampm plied markets, with the common link brand’s offbeat persona. being the ampm franchise. “Primarily, we are looking for some- Driving Fun one who we can get married to,” MacLeod emphasizes. “In California, A brand that actually encourages mayhem? For Andrew Baird, the essence of the ampm brand lies in its focus on fun. To that end, the company drives around a “Too Much Good Stuff” truck that promotes, where we have a mix of company-oper- ated and franchised, for instance, we’ll among other things, the act of mixing different fountain-drink flavors, encouraging customers be entirely franchise-focused.” to create their own recipes. With many but not all properties to “We introduce ampm as an edgy brand with point-of-sale material, samplings of new include land, buildings, the brand and products as well as TV and radio,” says Baird, vice president of marketing and merchandising royalties, much is at stake, she says:“[The for the ampm franchise. The brand elicits a sense of ownership from customers, he says: franchisee] is really getting ownership. “The ampm franchise is a unique phenomenon. It’s a loyal customer base. I’ve walked into That’s why it’s a 20-year contract.” a store where [a customer] would come up to me and ask if I needed anything.” In states that have yet to understand what the brand stands for, Baird says, “The ampm Franchisees Speak name intuitively gives a sense of a store that’s open early and has convenient hours, whereas Current ampm franchisees such as the BP Connect name has less of that sense and retained a tie to the gasoline brand. We Juckniess and Scaramella view the wanted the convenience store to stand on its own.” opportunity optimistically. “One of the things that excites me is it’s an want to get in and out ... and quickly.We Calif.), leaving the rehiring of store-level ever-changing model,” says Juckniess, are still offering our customers sand- personnel up to the incoming franchisee who started in the business 22 years wiches that are made fresh to stock or and setting up a series of in-field fran- ago with Houston-based Shell.“BP is come from a quality supplier.” chise-support representatives. coming to the site level, to people like At the end of the day, MacLeod says, This ongoing phase is “As long as you keep the [foodservice part of an announced cut area] clean, it tastes good and has qual- of 9,500 jobs tied to the “The majors saw how hard it was to ity, you’ll keep those customers.” franchise move. In a related sit in Houston and decide what salty decision announced last Selloff Strategy February, BP said it would snacks to carry in New Jersey.” With the transition to a franchise model cut an additional 5,000 jobs DAN GILLIGAN PMAA in motion, the next steps have included to trim management costs. the elimination of its company-operated With regards to the sale of U.S. prop- me, and is willing to [listen].” infrastructure (a decision that will close erties, each affected market will undergo After a less-than-stellar experience its Naperville, Ill., retail headquarters in a series of bid seminars to identify and with Shell as a multisite operator, where favor of its franchise digs in La Palma, inform potential franchisees of the BP he had grown to operating 50 sites that 38 CSP A p r i l 2 0 0 8
  7. 7. were ultimately shifted to Montreal- based Alimentation Couche-Tard’s Cir- cle K chain, Juckniess looks forward to growing his seven-store network. “A clear sign of my enthusiasm for the offer is how I’m actively participat- ing in bids as BP continues to relin- quish its company-operated stores,” he Inside ampm says.“If I wasn’t satisfied with the expe- rience, I wouldn’t be putting myself A ndrew Baird, vice president of marketing and merchandising for ampm, outlines key concepts beyond advertising that make up the convenience through the process [again].” Juckniess, who is based in the franchise: Chicago area, says the strength of the Bakery. Freshly baked pastries, bagels and BP brand, the enthusiasm he feels croissants are part of the morning offer, with ovens from the franchising staff and the ele- from the former Wild Bean concept being put to use. ments of the program itself make it a Hot foods, 24 hours. A snack-meal menu of compelling offer. hot dogs, burgers, chicken sandwiches, corn dogs, Scaramella in Arizona is equally barbecue ribs and nachos. excited as he seeks to expand on his Condiment bar. Accompanying the hot meals Southwest holdings. Having operated is a condiment bar designed to allow for customer customization that’s also operationally easy to in a multistate format in a previous maintain. business life, Scaramella sees potential Coffee. An expansive range of gourmet in further involvement with the fran- coffee options. chise, especially with existing sites. Fountain. Up to 24 flavors, colorful graphics “With building locations you can and the choice of either crushed or cubed ice. run into constraints that can put you Proprietary products. The ampm franchise behind,” he says. “With these sites you has developed its own proprietary line of water, … can take advantage of a staff of peo- energy drinks and sports water. Baird says soon- ple already working there instead of to-be-introduced products include meat snacks starting from scratch.” and nuts. For retailers such as Scaramella, Training. The franchise supports an eight- going forward means entering into a week training program for employees, focusing on long-term agreement in return for a the operational processes necessary for success. Marketing. A 60-day marketing program known business formula. includes TV, radio, Internet, sampling and local “It’s a 20-year relationship, not only events (see sidebar, p. 38). for the ampm franchise but also a 20- year BP gasoline-supply arrangement,” says Evan Gladstone, executive man- aging director for NRC Realty Advi- sors. “And a good formula is a good formula. You wouldn’t go out and buy a McDonald’s franchise and expect to serve crab cakes. The ampm offering is what is attractive.” 40 CSP A p r i l 2 0 0 8
  8. 8. The Roadmap L aying out the time frame and steps in BP’s transition to turn over its company-operated sites to a franchised model, Fiona MacLeod, president of BP U.S. convenience retail, says the entire process should be complete by 2009. harnessed by a particular brand, a new Step I: Brand transition to ampm franchise may have a chance. But in Chicago: Scheduled for February 2008 areas where you have a Sheetz or a Atlanta: May 2008 Wawa, you may be throwing good Orlando, Indianapolis: June 2008 money after bad,” Zielinski says.“Con- Ohio, Pittsburgh: July 2008 venience retailing has always been about Step II: Property sale store-level execution. Franchises offer Entire portfolio: Sale projected to complete at the end of 2009. the retailer tools to assist in creating a pleasant buying experience for the con- Will the Numbers Work? sumer. Other more established brands, companies and For traditional retailers eyeing the potential of the BP fran- organizations already have these systems in place.” chise, central to the final calculations will be baseline mar- Looking at the potential with a critical eye, Zielinski is gins, according to several observers. optimistic.“The key is not to overpay,” he says.“When peo- In states east of the Rockies, the ampm brand is untested. ple pay the right amount, it all works out. In fact, I know “You’re giving up a percentage to the franchisor, but what per- some current BP franchisees who are very happy with the centage is the consumer willing to pay?”asks Michael Zielin- program and see potential for growth with the franchise.” ski, president and CEO, Royal Buying Group, Lisle, Ill., whose Getting to that win-win place may have just gotten more company works with majors such as Shell and its multichan- difficult due to, of all things, a recent streak of healthy gaso- nel network.“It hasn’t been played out yet. line margins, according to one Midwest retailer.“We believe “In certain areas where c-store market share has yet to be this robust environment has led to a disconnect between buyers’ and sellers’ expectations,” said Bill Walljasper, CFO for Ankeny, Iowa-based Casey’s General Stores, during the company’s second-quarter investor’s call last month.“As we started to see the gasoline environment become what it is right now, and it started in the late fourth quarter, we started to see the disconnect becoming increasingly more chal- lenging because of the higher gasoline margins.” Back in Business During the bid process, retailers might be well advised to note the favor they are doing the majors, some believe. The majors, in this case BP, are intent on transition. In the historic love-hate cycle major oil has had with retail, the cost of doing business today is simply making street-level operations less appealing. “Retail gasoline is so competitive, and it’s so tough to make a penny and be profitable,” Gilligan of PMAA says.“[Certain markets] have just too many stations, too many c-stores, so much competition that they’re just beating each other’s brains out. Then you have other areas where competition is getting to where you might be able to make a profit. Until the retail gasoline business somehow gets profitable, I just don’t see why anyone would want to come back.” Back in the 1970s it was easier to get into the business, he says. Today, with the average store bringing in $37,000 a year 42 CSP A p r i l 2 0 0 8
  9. 9. (according to NACS) on a $2-million and they’re making 5 cents.” pendent Oil Marketers Association, investment in tanks, dispensers, liability, And yet, interest in the properties Sacramento, Calif.“It’s apparent that as training and real estate,“not many see seems high.“There are a lot of people companies continue to put resources on that as great, plus all the work involved,” looking at these stations or else [BP] the block, they wouldn’t do so if they Gilligan says.“And remember, just 10 wouldn’t be selling them, especially now weren’t getting some action.” years ago, crude was under $10 a barrel. with the way the economy [is slowing],” Marketers were charging 89 cents a gal- says Jay McKeeman, vice president of Jobbers’ Growth lon and making 10 cents. Now it’s $3.50 government relations, California Inde- With the metrics of the business hav- ing flip-flopped, Gilligan says the go- to class of trade these days has become the jobber. “Jobbers are set up to deal with 40, “If I wasn’t satisfied with the 50, 60 stores and have the credit stand- ing to support that,” Gilligan says.“Cer- experience, I wouldn’t be putting tainly the majors would gain little if myself through the process [again].” they sold off these sites one at a time, BOB JUCKNIESS RWJ Management because the [single-store operators] would have significant credit and man- agement issues. It’s a natural fit to start selling them off to jobbers.” 44 CSP A p r i l 2 0 0 8
  10. 10. In the larger scheme of things, the arates the jobber and dealer classes of option to explore, develop, produce and majors are on one hand diluting con- trade.“[The system] won’t support the refine, and ease away from retail.” trol of retail. But on the other, he says layers of cost. It did years ago, when fuel With regards to BP specifically, few the end result is a “stronger, decentral- was cheaper.” industry voices oppose the move, with ized industry involving companies Decentralization is a natural step, the majority focusing mostly on the closer to the [local] business.” Gilligan says. “Big companies eventu- potential it brings. Gilligan even sees the power shift ally reach a point where they focus on “It’s a smart move, [one that] gives politically, where traditionally the doing what they do best, and that’s me an opportunity for growth,” says majors have participated heavily in what’s happening with the oil compa- Scaramella of Arizona Oil. “Any time retail legislation. With PMAA being a nies,” he says.“In terms of energy pro- you have people investing their own federation of state associations, he’s seen duction, we’re facing an enormous money, work ethic and hours, you’re the majors ease back on retail issues, challenge in the global race for energy. going to get a better product at the end letting the responsibility fall to PMAA Oil companies feel it’s their best profit of the day.” I and its coalition. Zielinski of Royal Buying Group agrees, pointing out that the majors in general will probably move to the job- MORE ON BP ber-run paradigm. “It takes the gray Don’t miss exclusive interviews with Fiona MacLeod and area out of the pricing model,” he says, Andrew Baird on CSP TV: www.cspnet.com/ampmtv. referring to the tiered pricing that sep- A p r i l 2 0 0 8 CSP 45

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