Gas station owners react to the BP boycott
07-09-10 | 01:12 PM
#16
BP is taking care of them in their own way.
WSJ
NEW YORK—BP PLC is expanding financial incentives to its branded fuel marketers facing reduced sales and boycotts related to the Gulf of Mexico oil spill.
In addition to covering the marketing costs for distributors and filling-station owners, the oil giant is cutting credit-card fees and offering a cash refund for BP-branded fuel sold, according to the BP Amoco Marketers Association, an independent organization representing 10,000 BP stations.
The fee for BP cards will be suspended outright while fees owed to BP for other Visa and MasterCard Inc. card fees will be cut by a fifth, benefiting gas-station owners directly. BP will also offer a one-cent-a-gallon refund to its distributors for some fuel sold during the summer.
BP suffers little direct impact from consumer protests or boycotts of its branded stations because the vast majority of them are owned by independent entrepreneurs. These include 10,000 retail stations that fly the BP flag and another 1,000 or so that carry the Arco and "ampm" names. There are roughly 475 distributors, known as jobbers, who supply these stations and sometimes own them outright.
The new incentives, plus advertising support, would total about $50 million to $70 million, but it is unclear how much will be allocated for each particular facet of the plan, said John Kleine, executive director of BP Amoco Marketers Association. The board's 21 members met with BP marketing executives in Chicago last week. BP spokesman Scott Dean confirmed the moves in an email, adding the company was rolling out a marketing package tied to a "Locally Owned, Locally Operated" message.
In recent weeks, distributors and gas station owners carrying the BP brand have stepped up marketing campaigns as oil continues to gush into the Gulf 10 weeks after the explosion and sinking of the Deepwater Horizon rig. BP has backed their efforts by covering marketing expenses and providing templates for radio, television and on-site advertising campaigns.
The impact from boycotts has varied widely at retail stations within a single city depending on demographics. Some sites haven't been affected at all while others have seen sales drop anywhere from 5% to 30%, according to reports Mr. Kleine has received.
"We are all very anxious," said Mark Oil Co. President Bill Tome, based on conversations with other distributors. His firm operates 35 stations in the Charlotte, N.C., area. As the oil spill drags on, "people become more anxious and frustrated," and fears are customers will start avoiding stations even more, he said.
In a letter to distributors, BP said it would drop the fixed 13-cent charge for the BP proprietary card to zero and lower the fee for Visa and MasterCard cards to 1.4% from 1.75%, Mr. Tome said. All card transactions across the BP-branded retail sites are executed through a company system, a common practice in the fuel distribution business. BP estimated the savings will come to about half a cent a gallon for the retailer, Mr. Tome said.
BP is also offering a special, volume-based refund to retailers this summer. Once a retailer sells 85% of the total average volume of fuel it purchased from BP during the first four months of the year, it will collect a refund of a penny a gallon in June, July and August—the peak summer driving months.
Distributors in the Gulf region have been hardest hit by the fallout from the spill, with sales down by an average of 10%, compared with a drop of 5% elsewhere in the U.S. Some of the retailers and marketers in the Gulf already receive a penny-a-gallon refund from BP and the new program could double their refund, Mr. Tome said.
The Gulf area's retailers and marketers also have the option to try to offset some of their losses through the broad $20 billion fund BP set up to compensate for business lost because of the spill. Mr. Kleine said he didn't know if any of them had applied.
In addition to covering the marketing costs for distributors and filling-station owners, the oil giant is cutting credit-card fees and offering a cash refund for BP-branded fuel sold, according to the BP Amoco Marketers Association, an independent organization representing 10,000 BP stations.
The fee for BP cards will be suspended outright while fees owed to BP for other Visa and MasterCard Inc. card fees will be cut by a fifth, benefiting gas-station owners directly. BP will also offer a one-cent-a-gallon refund to its distributors for some fuel sold during the summer.
BP suffers little direct impact from consumer protests or boycotts of its branded stations because the vast majority of them are owned by independent entrepreneurs. These include 10,000 retail stations that fly the BP flag and another 1,000 or so that carry the Arco and "ampm" names. There are roughly 475 distributors, known as jobbers, who supply these stations and sometimes own them outright.
The new incentives, plus advertising support, would total about $50 million to $70 million, but it is unclear how much will be allocated for each particular facet of the plan, said John Kleine, executive director of BP Amoco Marketers Association. The board's 21 members met with BP marketing executives in Chicago last week. BP spokesman Scott Dean confirmed the moves in an email, adding the company was rolling out a marketing package tied to a "Locally Owned, Locally Operated" message.
In recent weeks, distributors and gas station owners carrying the BP brand have stepped up marketing campaigns as oil continues to gush into the Gulf 10 weeks after the explosion and sinking of the Deepwater Horizon rig. BP has backed their efforts by covering marketing expenses and providing templates for radio, television and on-site advertising campaigns.
The impact from boycotts has varied widely at retail stations within a single city depending on demographics. Some sites haven't been affected at all while others have seen sales drop anywhere from 5% to 30%, according to reports Mr. Kleine has received.
"We are all very anxious," said Mark Oil Co. President Bill Tome, based on conversations with other distributors. His firm operates 35 stations in the Charlotte, N.C., area. As the oil spill drags on, "people become more anxious and frustrated," and fears are customers will start avoiding stations even more, he said.
In a letter to distributors, BP said it would drop the fixed 13-cent charge for the BP proprietary card to zero and lower the fee for Visa and MasterCard cards to 1.4% from 1.75%, Mr. Tome said. All card transactions across the BP-branded retail sites are executed through a company system, a common practice in the fuel distribution business. BP estimated the savings will come to about half a cent a gallon for the retailer, Mr. Tome said.
BP is also offering a special, volume-based refund to retailers this summer. Once a retailer sells 85% of the total average volume of fuel it purchased from BP during the first four months of the year, it will collect a refund of a penny a gallon in June, July and August—the peak summer driving months.
Distributors in the Gulf region have been hardest hit by the fallout from the spill, with sales down by an average of 10%, compared with a drop of 5% elsewhere in the U.S. Some of the retailers and marketers in the Gulf already receive a penny-a-gallon refund from BP and the new program could double their refund, Mr. Tome said.
The Gulf area's retailers and marketers also have the option to try to offset some of their losses through the broad $20 billion fund BP set up to compensate for business lost because of the spill. Mr. Kleine said he didn't know if any of them had applied.
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