The iconic fuel brand is expanding into new markets with a fresh image and a renewed focus on operations.
By John Lofstock, Editor.
There was a time several decades ago when Gulf wasn’t just a downstream oil company—it was an integrated powerhouse with operations across several continents, from upstream to downstream, and with a heavy trading presence on Wall Street.
Its global brand recognition made Starbucks look like the local coffee truck.
But since the 1980s the brand has endured a series of owners—from BP to Chevron—that were more interested in the Gulf real estate than preserving the brand. This ownership confusion alienated independent dealers and jobbers and the Gulf brand eventually fell out of favor on the street.
This decline in the late 1980s coincided with the rise in proprietary fuel brands spurred by the success of chains like Sheetz, QuikTrip and RaceTrac, all while Big Oil flexed its muscle to secure long-term supply contracts by acquiring strong corners in competitive markets.
The Gulf brand for the next 25 years was only made available in an 11-state region in the Northeast through a licensing agreement between Cumberland Farms and Chevron, something that was required by the FTC when Chevron bought the old Gulf Oil Corp. in 1986.
But Cumberland Farms recognized the value of the iconic Gulf brand and began planting the seeds for Gulf’s revival as far back as 2005 when they brought Joe Petrowski aboard as CEO along with Rick Dery, senior vice president of branded sales and marketing. Those moves were followed up with the addition of Ron Sabia as Gulf president in 2009.
Under the trio’s leadership and guidance, Gulf Oil LP acquired all rights, title and interest to the Gulf trademark in January 2010. Gulf Oil now owns the right to market the venerable fuel brand throughout the U.S. and its territories for the first time since 1986.
“When this management team came on the scene we understood that we had a tremendous asset on our hands even though were in a difficult position because of the agreement with Chevron,” Sabia said. “We saw this legendary brand that had been allowed to slip into a state of disrepair because of underinvestment over time, so it was an early goal of ours to restore the brand to prominence.”
Armed with the branding rights, superior leadership, an updated brand image and a focused retail expansion plan, Gulf has been reenergized and could be heading to a major market near you.
“The Gulf brand is quickly becoming the premier brand of choice for an on-the-go world,” said Petrowski said. “This year was quite successful for building, and in many cases rebuilding, consumer loyalty for a commodity product. Not an easy task. It is made easier by working with trusted, professional partners who take pride in working with this brand, rooted in nostalgia, to distribute the finest gasoline and petroleum available.”
Back to Business
As the owner of the Gulf trademark Sabia and his team are readying the next chapter in the oil company’s growth story.
“The first several years here were about building a platform and reestablishing the brand, which we did through image and advertising promotions,” Sabia said. “Rick and his team have done a great job upgrading the sites that we did have, but to get to the next level we realized we had to have a retail concept that would resonate beyond our 11-state footprint.”
In fact, updating the image and developing a marketing strategy was something Sabia has been conceiving since day one on the job.
“Since our first week here as a management team our goal was to expand our license, and we continually had dialogue with Chevron over the years, but it wasn’t until Chevron’s pullout from the Mid-Atlantic, which they announced about two years ago, that they were willing to discuss having us grow outside the original 11-state region,” Sabia said.
Petrowski and his team made annual trips across the country to Chevron’s headquarters in San Ramon, Calif., with the hopes of snagging a bigger piece of the marketing pie. Their persistence began paying off in late 2009.
“Literally hours after Chevron announced its Mid-Atlantic pullout, our discussions with them turned from expanding the license to an outright purchase of the Gulf trademark,” Dery said of the negotiations that went through Christmas.
The end result was well worth the wait. “Overnight we experienced a huge change in the marketing area from which we can grow,” Dery said. “We went from a universe of about 27,000 stations in our former footprint to some 165,000 stations today. So for us it was a nice blank canvas to grow and expand the brand.”
Returning to Prominence
One of the first tasks at hand in 2005, Dery recalled, was embracing the challenge of rebuilding an infrastructure that would become the foundation for all future growth. “We inherited a company with 1980s-era systems that lacked a scalable platform we could work with,” he said. “So we spent a lot of time investing in systems and talent with an eye toward expanding beyond the 11 states.”
Finding the systems was fairly straightforward for a management team with more than 100 years of combined retail experience. Finding the talent was a bit more difficult, but once the team started recruiting with their plan to restore the Gulf brand, people were willing to listen.
“While this was not the plan early on, we ultimately turned over 60% of the headquarters staff in the first three years and were able to recruit a great team of professionals both from inside the convenience store and petroleum industry and from outside the industry,” Dery said. “This infusion of talent landed us the folks who are growing the business today.”
In a crowded and competitive industry Gulf also seized on the opportunity to reinvent itself as a brand that communicated effectively and was focused squarely on the needs of its branded marketers. This would not only help the company grow, but would serve as a great marketing tool for recruiting dealers that were either tired of playing politics with the Big Oil companies or simply looking for a new brand to distinguish their retail portfolios.
“It was imperative that we put together a team that is able to react quickly to markets and modify our business strategies,” Sabia said. “This is an intellectual capital business. It’s not so much about the assets we own, but how we deploy them. You could drop this group of folks anywhere in the industry and they will find a way to be successful.”
With the systems and employees in place, Gulf moved onto phase two: Operations. Gulf mastered its 11-state market, but growth opportunities were limited. The acquisition of the Gulf trademark offered an immediate transformative opportunity for rapid retail expansion because Chevron also announced it was withdrawing from a market where it had 1,100 stations, effectively making each one of them a free agent.
“There was a big universe of sites right off the bat for us to approach with the Gulf brand, and many of those that we approached had a Gulf heritage and fond memories of the Gulf brand,” Sabia said. “These areas also complemented our existing territories. For instance, the brand didn’t have a presence in Maryland, but marketers there had seen it across the border in Pennsylvania. Those areas that were tributary to our existing territories were ones we targeted very quickly along with the Chevron sites.”
The response to Gulf’s revival was swift. In just 20 months the company added about 200 sites and 15 states to its network, increasing its branded store count to 2,600 dealer-operated units in 26 states. Eleven additional units are company operated and approximately 400 sites are branded with a Gulf Express convenience store.
A significant amount of real estate for these 2,600 units is held by the Cumberland Farms Group. They operate upwards of 600 of the Gulf sites.
The initial focus of Gulf’s growth was along the Colonial-Plantation pipeline corridor in the Southeast. The plan over the next several years is to become a complete PADD 1 (East Coast), PADD 2 (Midwest) and PADD 3 (Gulf Coast) marketer terminally and supply sites from Chicago to New York to the Gulf Coast.
This recent growth spurt has come from a mix of rebrands and new-to-industry sites. “To facilitate growth in the future we may try to acquire jobberships and real estate as a tool to help us build the brand in certain geographies,” Sabia said.
In the past, Gulf had very few marketing restrictions when it came to signing up new stores, but as part of its revival it is committed to vetting out prospective dealers to ameliorate past mistakes.
“In 2006 we could knock on the door of a distributor flying the Shell or Mobil banner and ask if they’d like to join us and they would laugh,” Dery said. “Well, today, those same distributors are actually calling us. We’re receiving phone calls from distributors that want to be part of the excitement and the enthusiasm that surrounds the Gulf brand. By focusing on the better sites and the better distributors that are actually reaching out to us we are hanging our flags at the finest locations across new markets, and it’s contagious. As we attract great locations, more great locations want to be a part of the action.”
Attracting these top corners in new markets is hardly a coincidence. The company has launched a major advertising blitz in prospective markets where it doesn’t have a single site. For example, at Busch Stadium, home of the St. Louis Cardinals, the Gulf logo is prominently displayed along the right field wall. “Yet, not only don’t we have a store in St. Louis, we don’t have a single store in all of Missouri—but we will,” Sabia said.
To support the push into these new markets the company also plans to introduce “one of the most prolific loyalty programs” within the convenience store and petroleum industry, Dery said. The rollout is expected to begin as early as September.
Using the tagline “The legend is back,” Gulf has deployed a similar strategy in Illinois, Minnesota, Texas, Georgia and Maryland with fantastic results. It now has 140 units in Atlanta, 142 locations in Baltimore, and in late July signed a deal with MTG Management to return to its Texas roots. With about 13,400 retail gasoline stations in the Lone Star State, Gulf is poised to once again become a household name
“This has been a long and difficult process, but success breeds success. With every win and with every new state we enter, it reinvigorates us and pushes us to work even harder,” Sabia said. “I think people want to be part of a winning team, and that’s what we are all about.” CSD
While Gulf Oil and CUMBERLAND FARMS have been intertwined since 1986, they are two separate and distinct brands that operate under The Cumberland Gulf Group—Cumberland Farms Inc. and Gulf Oil LP. Up until 2005 Cumberland Farms Inc. was a two-thirds owner of Gulf Oil LP. In 2005 they bought back the one-third ownership interest that they didn’t own before and brought in a new management team to run Gulf Oil.
The current management team includes Lily Bentas, chairman of the board of Cumberland Farms Inc. Joe Petrowski is the CEO of both Cumberland Farms and Gulf Oil. Ron Sabia is president and chief operating officer of Gulf Oil and Ari Haseotes is president and chief operating officer of Cumberland Farms.
Gulf Oil handles the downstream oil distribution business providing branded and non-branded fuels through its network of 12 terminals and through third-party terminal networks. Cumberland Farms operates 600 convenience stores primarily in the Northeast and Florida and holds the deeds to another 400 stations in those markets.
While Gulf and Cumberland are separate operating entities, they have been working together to reduce overhead costs. For example, in 2008 the companies moved into a joint headquarters in Framingham, Mass., and combined the activities of several back-office functions such as legal, human resources and IT.
At a glance: Gulf Oil
Gulf Oil LP is back and plans to make a big splash in the U.S. market. The company manages more than 2,600 Gulf-branded retail centers in 26 states and 12 petroleum terminals. Eleven of the sites are company operated and approximately 400 sites are branded with a Gulf Express convenience store. While Gulf Express comes with a set interior and exterior imaging package, what’s sold in-store and how it’s managed is solely at the discretion of the dealer-operator.
Headquarters: Framingham, Mass.
Executive Leadership Team:
• Joseph Petrowski, Chief Executive Officer
• Ron Sabia, President and Chief Operating Officer
• Rick Dery, Senior Vice President of Branded Sales & Marketing and Chief Marketing Officer