MAPCO Express Rolls On

While many chains are still feeling the crunch from the current economic recession, others are seeing opportunity. Count MAPCO Express among the companies waiting to pounce.

MAPCO Express, a subsidiary of Delek US Holdings, has a long history in convenience retailing. It continues rolling out an upscale convenience store concept, branded MAPCO Mart, and is prepared to acquire news stores, but only in those scenarios where there is an opportunity to generate long-term, sustainable value.

“Our objective is straightforward: we seek to become the leader in the markets we occupy,” said Lynwood Gregory, chief operating officer for MAPCO Express. “As far as expansion, we will continue to seek out undervalued strategic acquisitions from distressed sellers  that stand to provide long-term operational synergies. As one of the largest company-operated convenience store chains in the country, we look to capitalize on economies of scale not available to small independent chains.”

Today, the Brentwood, Tenn.-based company operates more than 450 stores in eight states throughout the Southeast, though primarily in Tennessee, Georgia and Alabama. As it has done throughout its nearly 30-year history, the chain is firmly committed to reinventing itself and its commitment to convenience retailing.

MAPCO launched a prototype design about five years after benchmarking against top, next-generation c-store concepts for more than a year. The MAPCO Mart design is 5,000 square feet and features a host of amenities including up to 10 fuel dispensers, state-of-the-art lighting, 16-18 cooler doors, beer caves, fresh foods and foodservice, in addition to ordering touchscreens inside and out.

“Our prototype can compete head-to-head with virtually any c-store concept in the market today,” Gregory said. “We took the best of the best and started sticking them on our best corners. About 70% of our properties are on prime corners, so this design is a good fit.”

Since 2005, MAPCO has developed 118 of these MAPCO Marts, the majority through redesigns and 14 were complete raze and rebuilds. It takes about eight weeks to reimage a store, said Kim O’Dell, MAPCO’s vice president of marketing. The redesign is typically supported with a one-year advertising campaign to attract new customers.

For 2009, MAPCO planned one raze and rebuild and 35-40 reimages. Through the first half of the year, the company reimaged 21 stores in several its core Southeastern markets.

Long Retailing History
MAPCO was founded in 1981 with the acquisition of 255 Delta gasoline stations in Tennessee. Throughout the early 1980s, MAPCO continued to make strategic acquisitions, while divesting underperforming stores.

“In the early 90s, MAPCO introduced what, at the time, were some of the most cutting edge convenience store concepts of the day,” Gregory said. “By 1995, MAPCO was a leading champion of the co-branded c-store/QSR concept, culminating in the chain being named Convenience Store Chain of the Year by Convenience Store Decisions in 1996.”

MAPCO Express as it exists today was formed with Delek’s acquisition of 198 MAPCO Express stores from The William Cos. in 2001. Since 2001, it has made six additional acquisitions. It currently operates multiple c-store brands including the MAPCO Express, MAPCO Mart, East Coast, Discount Food Mart, Fast Food and Fuel and Favorite Markets banners.

MAPCO’s foodservice operations include its proprietary Grille Marx brand and dozens of co-branded units with the likes of Quiznos, Subway and Blimpie. Fuel is retailed under BP, Shell, Conoco, Exxon and Chevron, in addition to a thriving unbranded business.

Gregory and O’Dell sat down with Convenience Store Decisions to discuss MAPCO’s lengthy history in convenience retailing and its plans to proceed with a new upscale store design and a focus on customer service.

CSD: What are some of MAPCO’s core beliefs when it comes to convenience retailing?

LG: We seek to maximize value by providing true personalized convenience and work in the communities we serve, while providing our customers what they need, when they need it. Ultimately, it is our objective to become a best-in-class convenience store operation recognized for our visionary approach to serving customer tastes and preferences, while maximizing the customer shopping experience.

CSD: What distinguishes MAPCO stores from other convenience store brands, both inside the store and in the forecourt?

LG: Customers see us a place where personalized convenience, customer service and a commitment to value will always prevail. In addition, our rebranding process is proceeding. This program distinguishes us from many smaller operators, as it directly responds to the tastes and preferences of the key demographics we serve. This means more fresh food, quality private label products which sell at a discount to their branded counterparts and a clean, upscale shopping atmosphere.

CSD: How are stores operated? Are they all company-owned? And what is MAPCO’s real estate strategy?

LG: We operate our stores so that we can control the consistency of the operations, while also protecting the integrity of the MAPCO brand. We are not interested in a franchise model.

One of the primary differences between Delek US and other large chains is the company’s commitment to owning its real estate. Of the more than 500 stores we operated as of June 30, we owned about 60% of the underlying real estate, a key competitive advantage that allows us to avoid the lease finance obligations inherent within a sale-leaseback model.

In addition, given that we own much of our real estate, we have a collateral base, which we can use either to facilitate reinvestment in the existing store base or pursue additional acquisitions as opportunities arise.

CSD: The company operates many  c-store and fuel brands. Are you considering rebranding these units to MAPCO Mart?

KO: Over the long-term, our objective is to concentrate our various convenience store brands into a single identifiable brand identity: “MAPCO Mart.” This brand consolidation initiative continues to progress, particularly as we move forward with our store reimaging program. Through June 30, about 25% of our store base has undergone cosmetic reimaging, which includes the prominent display of the MAPCO Mart brand throughout the facility.

CSD: Where does the rebranding stand now and what can we expect in the near future?

LG: Since 2006, we have been engaged in a multi-year rebranding and reimaging initiative designed to expand the demographics we serve. Through June 2009, we have reimaged or rebuilt approximately 25% of our total store base. Overall in 2009, we intend to spend about $14 million to complete one raze and rebuild and reimage 35 to 40 of our existing stores. Through the second quarter of 2009, we had spent $5.6 million on these projects, including the completion of 21 reimaging projects.

CSD: What are the highlights of the MAPCO Mart stores?

KO: Our reimaged locations include new fixtures and graphics packages to create a more modern sensory experience to engage the customer. This typically includes, new floors, lighting counters and signage, to name a few. The prototype models are large, state-of-the art facilities with 10 MPDs, canopy parking, full foodservice, exposed ceilings, stone overlays, oversized bathrooms and the list goes on. We believe our prototype locations can compete head to head with virtually any c-store offering in the country.

CSD: What impact has the redesign had on fuel and merchandise sales?

LG: For the six months ended June 30, the 50 reimaged stores open one year reported a same-store fuel gallon sales increase of 5%, compared to a negative 1.4% for the entire store base during the same period. In addition, the same 50 stores reported positive merchandise sales growth of 5%, compared to negative 2.8% for the entire store base during the same period. There is a clear economic case to continue with our reimaging program.

CSD: Delek made a big splash in the U.S. market with the acquisition of MAPCO, and several other smaller acquisitions since. How has Delek’s influence helped the company grow?

LG: We have acquired more than 500 convenience stores since 2001, beginning with the 198 stores purchased from Williams. We strive to reengineer the business we acquire to achieve improved economies of scale, operational efficiency and profitability. Although much of our growth has been from acquisitions, we place considerable emphasis on organic growth.

Our long-term strategy includes targeted expansion in our core markets, and we remain poised to make one or more strategic acquisitions, should a good opportunity present itself.

CSD: These have been some challenging times for all retail operators. How have consumer spending habits changed over the past year? What are c-store customers looking for?

LG: Although unemployment remains elevated in many areas of the country, our markets have fared better than others. Now more than ever, we believe consumers are seeking value in one-stop shop, convenient locations. We believe the shift to value began last summer, when gasoline prices spiked in response to elevated crude prices, and consumers began to reduce their discretionary spending in stores.

As fuel prices returned to more normal levels in 2009, we have seen an uptick in store traffic in several markets, particularly with the advent of our summer fuel promotion, which began in June and lasts into September. We believe promotions such as these will continue to drive store traffic.

Overall, we are focused on providing the consumer a level of personalized convenience, quality products and an overall value that is tough to match. In so doing, we will be better positioned to expand our reach and grow market share in our core markets and beyond.

CSD: Finding and retaining employees has typically been difficult for convenience retailers. How do you find and retain your top employees?

KO: Since the inception of Delek US, our ability to hire the right people for the job has served us well, resulting in an impressive record of consistent growth and profitability. With more than 3,600 employees in nine states, we have brought together a diverse team of professionals passionate about investing their time and expertise in one of the most dynamic convenience store companies in the market today.

We offer a highly competitive benefits package designed to promote the health and welfare of our employees. In fact, we believe that our benefits package is one of the more generous in the industry.

Plus, from a recruiting perspective, we continue to upgrade the qualifications required of management level positions. One benefit of the economic downturn is we are able to hire very qualified talent that, five years ago, might not have considered a career in the c-store industry. Growing and bringing on new talent is crucial for our retail operations. For us, people are the backbone of our operation. CSD

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