CSNews Exclusive: Chevron Aims to Grow Retail Operations in the West
JERSEY CITY, N.J. -- The winds of change blew through Chevron last year as the San Ramon, Calif.-based oil giant reorganized to the tune of nearly a 12 percent job cut in its downstream oil refinery business (equivalent to more than a 3 percent overall company work force job cut), numerous executive job changes and the withdrawal of its motor fuels operations in some areas of the Eastern United States, namely: Delaware, Indiana, Kentucky, North Carolina, New Jersey, Maryland, Ohio, Pennsylvania, South Carolina, Virginia, West Virginia, Washington, D.C. and parts of Tennessee.
But how did this affect its retail business? Recently, CSNews Online sat down with Cary Knuth, newly named general manager of America's Products Retail West for Chevron and Colin Parfitt, newly named vice president of America's Products Retail West, who both described the refining of a tighter ship at retail, which includes Chevron's evolving ExtraMile concept.
"For us, the term is continuity. We have a great legacy of strong brands in Chevron, Techron and ExtraMile, and we want to grow those brands and continue to make them stronger," Knuth told CSNews Online. "Our strategy now is to hit the ground running. We have refocused on the retail business, and we want to add more quality operators in those areas where we are right now."
And that is clearly in the western region. "All of our research shows that our brand strength is stronger in the West. We have the No. 1 brand on the West Coast, and that gives us a strategic advantage there," Parfitt told CSNews Online. "We want to grow [retail operations] close to our refinery distributed areas." This includes Los Angeles, San Francisco, the Pacific Northwest, Salt Lake City, Hawaii and Vancouver. "We're very interested in growth where we have a major manufacturing hub because that makes for a short supply chain," he said.
Another advantage Chevron has out West is "a strategically different marketing view from our competitors," explained Parfitt. He said Chevron still markets to retailers directly. "We sell both direct and through our own company-operated network," rather than through a third-party marketer, as is the fashion of other oil companies lately.
"Retailers don't know who they're going to be served by, how they're going to like them, what the service is going to be like, and so on," stated Parfitt. "Our direct piece is one of the things retailers want. They want the direct relationship."
As for the ExtraMile retail concept that Chevron brought to the West Coast a few years back, the company is seeing double-digit increases in c-store sales, and better performance in gasoline sales in ExtraMile's versus our non-ExtraMile's," Knuth said. "And we're seeing our franchisees that might have branded one of their sites to ExtraMile, come back and say, 'hey, I want to convert all of my locations,'" he noted.
The chain has close to 500 ExtraMile stores on the West Coast, with roughly 225 franchised locations, and the rest are company-operated. It is looking to grow more franchised locations, forecasting to get that number up to 400 in the next two years. This year alone, it plans to add about 100 franchised ExtraMile stores.
"We think we can get to around 400 franchisees and 400 company operations, so that's eight or nine-hundred at the end of the day," Knuth said. "That's a strong c-store brand that we can leverage greatly."
And Chevron is taking care to evolve that brand continually. Its ExtraGood to Go food and beverage concept, convenience-store style is "an example of one of those things we're doing well, but can potentially do better," Knuth said. "We know we have to evolve the offering and be continually engaged about it all the time."
To facilitate this, Chevron recently put together a "Franchise Council" that meets three times a year. "We bring in category managers, and we'll have an open discussion about what they're hearing about, what's not working and what is working really well that we should be doing more of," Knuth explained. "The idea is we want to bounce things off of them as much as we can so that we can continually course-correct ExtraMile."