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WASHINGTON, D.C. -- Continuing a contrarian line of thinking, Trilby Lundberg of the Lundberg Survey and Lundberg Letter said hypermarket share of retail gasoline will not climb as precipitously as other analysts have predicted.
While groups like Energy Analysts International expect big-box retailers to seize 15 percent market share by 2005, Lundberg sets the bar at 8.9 percent -- a significant share but far below the doom-and-gloom forecasts circulated within downstream circles.
Saying that hypermarkets currently hold a 5.5-percent share, Lundberg said, "We expect continued heavy expansion in the number of retail sites in 2003, then tapering off in 2004 and 2005."
Differing from other analysts, Lundberg also projects that U.S. gasoline consumption will grow at a more rapid pace, estimating a 2.7-percent spike in 2002, followed by assumed 2-percent growth from 2003 through 2005. Most forecasters estimate a 1-to-1.5-percent annual increase.
Lundberg has drawn stinging rebuke from many downstream organizations and retailers for dismissing the widespread complaint of below-cost pricing. Many industry officials accuse big-box operators of selling well below wholesale prices, deliberately taking a loss on fuel to drive traditional retailers out of business.
Lundberg contends that no retailer of any size is willfully taking a long-term loss on gasoline and said below-cost tactics are employed for only a short period to build traffic. Indeed, in the current Lundberg Letter, she notes that Costco Inc., which enjoys the largest average gasoline throughput of hypermarketers, "while still a lowballer, prices closer to the market than it had initially."
The report further breaks down all new stations, showing that big-box operators represent 20 percent of all new gasoline stations, and the remaining 80 percent coming from traditional convenience stores, niche market players and high-volume retailers with c-stores.
"This underscores the fact that the market is growing - for non-hypermarketers too, with savvy and optimistic retailers still constructing stations with zeal." She cited a Chevron dealer that opened a large c-store with a Starbucks inside and is pumping 800,000 gallons a month.
"Despite recent surges in hypermarketer share, a growing gasoline market allows for a flourishing retail gasoline industry," she said. "Although brutal and expected to cause continued station closures, the U.S. gasoline market is not a zero sum game."