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    Valero to Overhaul Retail Operations

    Oil company is ramping up for major retail push, reimaging campaign will affect more than 3,200 convenience stores and gas stations.

    SAN ANTONIO -- Valero Energy Corp. has embarked on a major rebranding effort for its U.S. gas stations. Among the goals of the reimaging campaign are to create a more modern look for the company's outlets and to introduce more motorists nationwide to the Valero and Diamond Shamrock brand names, reports the San Antonio Business Journal.

    One leg of the re-branding effort involves converting Valero's 876 Beacon, Ultramar and Total stores in the Midwest, Rocky Mountain and West Coast regions of the United States to either Valero or Diamond Shamrock service stations. The Beacon and Total outlets were picked up by Valero as part of its acquisition of Ultramar Diamond Shamrock Corp. last year.

    Valero also has begun investing heavily in either renovating or rebuilding some 3,200 retail outlets nationwide as part of a strategy to make them more competitive in the national market.

    Valero is looking to upgrade the exterior features of company operated stores by adding modern features like electronic card readers that allow customers to pay at the pump. The upgrade plan also calls for adding more interior products, such as an expanded grocery selection, depending on the market.

    The company also is giving more latitude to its area managers to custom-design marketing strategies in local markets.

    Retail Focus
    In the Alamo City area, the new look for Diamond Shamrock Corner Stores will mirror that of its recently completed stores in the city. Part of Valero's retail strategy also includes introducing its first Valero-branded credit card in January. No firm costs are in place for the re-branding effort because the level of investment in each store will depend on the projected return on investment in each market, the report said.

    The San Antonio-based refiner/marketer expects to spend between $30,000 to $50,000 per store to upgrade lighting, replace signs and add a fresh coat of paint, or as much as $1 million to knock down a store and rebuild it completely, the report said. The move will affect both company-operated stores and independently owned dealer franchises that purchase gasoline and diesel wholesale from Valero's 11 U.S. refineries, according to Gary Arthur, senior vice president of marketing for Valero.

    Independent store owners will have a choice of converting to either the Valero or Diamond Shamrock brand name, or to the Shamrock brand name as a lower cost alternative.

    Valero officials say this move to re-image the stores is necessary because Ultramar Diamond Shamrock had not kept pace with the competition in terms of investing in its properties.

    "After we acquired Ultramar Diamond Shamrock and did an assessment, we found that they had not invested much in their sites over the last several years," Arthur said.

    Part of that assessment included deciding which stores Valero would keep open and which ones would be closed. In all, the company shuttered 325 outlets nationwide, including about 10 in San Antonio, that were deemed either too small, too old or otherwise non-strategic.

    Valero, a relative newcomer to the industry, acquired its first network of 340 stores in northern California in 2000 as part of its agreement to acquire the ExxonMobil Corp. refinery in Benicia, Calif. Federal regulators required Exxon to divest those assets as a condition of its merger with Mobil.

    Because of the consolidation in the marketplace among many of the national brands, there are opportunities to expand Valero's retail distribution network to additional independent store owners that want new branding options, Arthur said.

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