National Petroleum News (NPN) has been the independent voice of the petroleum industry since 1909 as the opposition to Rockefeller’s Standard Oil. So, motor fuels marketing and retail is not just a sideline for us, it’s our core competency.
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MARKETING & SUPPLY BY KEITHREID NPN Magazine talks to Quality Petroleum and Pacific Pride CARDLOCK PERSPECTIVES I N JUNE, PACIFIC PRIDE SERVICES, LLC, A subsidiary of Wright Express Corp., announced that Quality Petroleum of Alabama had opened the first Commercial Fuel Center in Tarrant, Ala., to offer biodiesel for commercial fleet fueling as well as EPA- approved, ethanol-enhanced unleaded gasoline. The new location was Quality Petroleum's eighth Pacific Pride Commercial Fuel Center in Alabama. NPN Magazine decided to follow up with an interview of David Melton, vice president of Quality Petroleum of Alabama, and Gregory D. Iverson, president of Pacific Pride Services. NPN: David, give us an overview of your cardlock operations. Melton: Quality Petroleum has been operating cardlocks for approximately the last 15 years. When the underground stor- age tank regulations came into effect, some of the older service station facilities became non-effective as service stations. We realized that the commercial customer with fleets maybe had tanks on their own property and were going to have a problem because of the new regulations. A lot of them were getting out of the business. Pacific Pride had an excellent presentation on how to recapture a lot of that business, and we've been very lucky that we found some channels that have given us the ability to help our existing customers and then go out and find a whole new venue for customers to sign up and use our cardlocks. NPN: What role do cardlock operations play in your overall business portfolio? Melton: Cardlocks have probably been about 80 percent of our growth over the past five years. We have not been a large distributor in the third-party dealer fueling world. We main- ly own our assets, whether it's an operation that we choose to operate or lease out—we are going to own the tanks and the real estate. As we looked at the financial implications of building a convenience store in today's environment and the return on investment versus building a cardlock at reduced cost, we decided we were going to stay in the fuel business and serve the customers that needed information, education and fueling services. We found cardlocks to be a vital part and, quite frankly, the cornerstone of our business. 14 OCTOBER 2011 NPN: What is the current business environment like for cardlock operators with the economy? Iverson: Generally the industry is facing a lot of pressures at this point in time. There is a lot of consolidation going on, the margins are sometimes difficult to deal with, card fees are cutting into the margin significantly—certainly in the retail environment. One of the advantages of a cardlock is it is a closed network. The fees are less, in many cases the margins are better and a lot of commercial operators don't want their fleet drivers in the convenience store to cut down on distractions and save time. And cardlocks are generally much more suitable for commercial traffic and frequently have the products available that a commercial operator would need such as red dyed diesel. So it remains a compel- ling and viable business. Melton: In the last five years you have cut your sales oppor- tunities in half—the number of fleets out there, the number of businesses that have survived—so there is a much tougher research piece up front. But once you walk in you get their attention simply because they want to know what to do about fuel. Especially if fuel is the number one uncontrollable expense they have. You make a presentation that says this is what we do for a living—we're a refueling network. The next question out of their mouth is, "What's the price?" As a dis- tributor, I control what I charge them and I control how I buy it and who I buy it from and what products are in the ground. And the next thing we start talking about is what their needs are. Are their needs simply diesel fuel or do they have a fleet of cars or a mixed fleet? You don't get all the business, but you get an audience from somebody who really wants to listen and really wants to talk about what you have to offer. NPN: Quality Petroleum seems to be taking a leadership position with alternative fuels. What is your business phi- losophy on these products? Melton: We have been involved with alternative fuels from the get go. Quality Petroleum has co-ventured CNG sites and had great success with Pacific Pride. We have had cus- tomers come to us and say we want biodiesel—it's what is required of us. I can't go to the retail station because they are NPN Magazine n www.npnweb.com