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Competition for convenience and fuel will be getting hotter as Publix Super Markets, based here, and discount merchandiser Fred Meyer both turned up the heat last month.
Publix, the latest major supermarket to find value in fuel centers and convenience stores, recently rolled out two 4,000-square-foot super-convenience outlets on lots of existing locations in Poinciana and Deltona, Fla., recently. The new stores opened six months after the grocery chain launched its Pix c-store concept, a 1,000-square-foot retail combination featuring traditional convenience merchandise and gasoline.
Fred Meyer, an operating company of Hutchinson, Kan.-based Kroger Co., also upped its fuel ante as it began construction on a new FM Fuel Stop in Albany, Ore., its 17th in four states and the sixth in Oregon. Kroger Co. also operates more than 800 convenience stores under various brands.
The FM Fuel Stop, which will have five pumps including diesel, will open in July. The arrival of the new outlet comes just eight months after Costco opened a members-only gas station, driving prices down by some 30 cents a gallon, said Chuck Grato, a Shell jobber and operator of a Shell ETD convenience store also located in Albany.
Retailers in numerous markets have been struggling to develop strategies to compete more effectively with high- volume retailers (HVRs) selling gas. "The growth of high-volume retailers isn't slowing down and it's getting to the point where every large market is going to have at least one HVR to compete with," said Joe Gauthier, director of operations for Wesco Inc., a North Muskegon, Mich.-based operator of 53 c-stores. "If we try to hold on to market share based on price alone we are going to lose every time. We need to diversify our offerings by developing loyalty programs to keep our customers satisfied."
Designed by New York-based CDI Group Inc., the Pix stations promote a variety of Publix and nationally branded merchandise, as well as foodservice items including fountain beverages and sandwiches. The fuel islands offer eight gasoline nozzles.
Company spokesman Lee Brunson declined to comment on the fuel operations.
Publix, which operates more than 650 stores in four southern states, lags behind Albertson's, Safeway, Kroger and other supermarket chains that embraced gasoline as far back as the mid-1990s. Analysts have described the company as conservative, but growing.
"Supermarkets like Publix are seeing the value in having both fuel and traditional offerings in the same location," said George Dahlman, senior research analyst at U.S. Bancorp Piper and Jaffray. "[Pix] will cannibalize sales from the supermarket, but it also will take sales away from surrounding convenience store chains. From Publix's perspective it still means they've got that shopper buying from them. Whether it's in the supermarket or in their convenience store, it still goes in Publix's pockets."
Like Publix, Fred Meyer buys its fuel directly from the refineries, allowing it to save the cost of dealing with jobbers. In contrast, according to Oregon jobber Grato, most independent or leased stations in his region purchase their fuel from jobbers, adding an additional layer of cost.
In response to the burgeoning competition by volume dealers, Grato says some refiners are helping c-store retailers compete by paying dealer rebates. Grato participates in a program that pays retailers a per-gallon rebate and has been offered since another big competitor, Costco, moved into Oregon last year.