BP's Hitting Its Stride

Many years ago Paul Revere rode through the American colonies shouting his famous line, "The British are coming!" More than 225 years later, many U.S-based oil companies continue to echo his cry.

Fresh off of the biggest year in its history, London-based BP plc is growing at lightning speed. The company closed two major acquisitions over the past 24 months — Chicago-based Amoco Inc. and Los Angeles-based Atlantic Richfield Co. (Arco) — and reported record profits of $14.2 billion in 2000. While many companies would take some time to digest such acquisitions and plan the next move, BP wasted no time. It had been planning its strategy for nearly decade and moved quickly to bring its plan to fruition.

Part of BP's strategy included a new convenience store prototype, which it opened in January, along with aggressive plans to roll the concept out to six cities, and a plan to close or sell as many as 5,000 underperforming stores. The company also took the bold step last month of officially dropping the Amoco brand from both its corporate name and its retailing concepts. Amoco, however, remains the company's fuel brand at c-stores. Arco stores on the West Coast, for now, will remain branded am/pm.

"The Amoco brand is being incorporated into our new BP Connect locations because we recognize its value," said Ross Pillari, group vice president for BP's downstream operations. "We believe the loyalty to Amoco fuels will remain strong and that consumers will continue to seek out these products at the new Connect sites."

Pillari, along with Polly Flinn, BP's vice president of global retail marketing, discussed the rapidly changing face of BP's operating strategy in the United States with Convenience Store News.

Making the Connection

Few convenience store brands have rolled out to the fanfare BP Connect did in Indianapolis and Atlanta. So the natural question is, "Does the concept live up to all the hype?" It sure does.

Connect is helping BP break stereotypes Big Oil companies have lived with since the dawn of the convenience store age. In the past, Big Oil has lagged behind traditional convenience store operators in terms of understanding the local needs of customers and providing personalized service. BP Connect does more than represent a new brand for the oil company. It narrows the gap that has divided oil companies from traditional operators, while raising the bar for Big Oil's c-store standards.

With the new brand, the company aims to deliver an unmatched level of customer service and quality and welcome customers with an attractive design that includes the innovative use of solar power and a bright, clean atmosphere, Flinn said.

Retail lines have been blurring across all channels of trade. Supermarket chains and mass merchandisers sell gas, drugstore operators have a tight grip on holiday candy sales and maintain a strong tobacco business and even chains like Blockbuster Video have tapped into the snack category. These changes have left convenience store retailers contemplating where they belong and what their niche should be. BP is taking an opposite approach; the company is setting itself up to be the paradigm for other companies to follow.

"With the lines within the convenience store and petroleum industry blurring, retailers must do much more than meet the consumers' needs," Flinn said. "BP Connect meets the immediate needs of consumers and goes one step further by anticipating customers' other daily needs outside of the convenience store."

Among the new store's features:

Wild Bean Cafe: As an upscale foodservice offering, the Wild Bean Cafe features reasonably priced fresh foods and meals. The cafe offering includes gourmet coffee, a selection of herbal teas and fountain beverages, fresh-baked breads and pastries, specialty soups, custom-made sandwiches and salads.

E-kiosks: In-store Internet kiosks allow customers free access to weather updates, local traffic reports, directions, up-to-date news stories and information on special store promotions.

E-dispensers: At futuristic-looking pumps, busy customers can use "touch and go" screens to pre-order sandwiches and drinks and obtain local news, traffic and weather information.

Amoco fuel: In the United States, BP Connect stores feature Amoco fuel, including Amoco Ultimate — BP's proprietary premium gasoline that has lower sulfur content, in compliance with the Environmental Protection Agency's current sulfur regulations.

Solar power: A solar canopy over the fuel islands protects consumers from the elements and allows daylight to shine through to create a bright, open environment, Flinn said.

BP is committing more than $100 million to the brand's rollout and expects to have approximately 300 units over the next 12 months.

"BP's strategy for retail growth is to leverage our real estate holdings and strong position in key markets," Pillari said. "We have identified those markets and are excited about building our brand there. BP Connect sites and rebranded BP stations will be seen soon in Chicago, Cleveland and New York."

Defining a Strategy

Just prior to its acquisition of Amoco, BP had completed a great deal of consumer research while Amoco had just refreshed its Split Second convenience store brand. To get the Connect brand off the ground, BP merged the research the two companies gathered and added a study of the retailing practices of more than 20 countries around the world.

"What that told us is that consumers were actually more similar than dissimilar around the world," Flinn said. "Convenience needs over the last two or three years, even in developing countries such as Poland and Venezuela, and countries like England and France, are emerging as a significant need." BP arrived at three basic tenets in its development of the Connect brand.

Be environmentally and community conscious. Customers are concerned about the environment and their community, Flinn said. In surveys and exit polls, BP's customers showed a willingness to stay loyal to companies that make an outward attempt to improve the quality of life in the community.

The average convenience store customers is time-starved. Today's customers are looking for a one-stop destination to accomplish everything from getting breakfast to the morning news, weather and traffic.

Quality brands' drive can not be underestimated. Although BP said it would rebrand its Amoco Split Second c-stores to the Connect brand, BP found that customers, especially in the Midwest, were loyal to Amoco. This forced the company to make Amoco the fuel brand at all Connect stores.

One potential problem with the proliferation of BP's brands is an overlap with dealers and jobbers in certain markets. To that end, BP is preparing to make the Connect brand available to dealers and jobbers, Flinn said. BP is expecting to make the brand available to its current partners by the end of the year, but is also looking to attract new dealers.

"Certainly based on our existing relationships, we would want to start with our dealers and jobbers, and then attract new people to the industry," she said. "But first and foremost, we want to make sure the brand is of value to our existing partners."

For the foreseeable future, BP and Amoco stores operated by dealers and jobbers will remain just as they are, Flinn said. Next year, however, the company will begin encouraging its retail partners to rebrand to Connect. To entice retailers, BP plans to provide financial assistance, which will be available due to the closing of underperforming stores, Flinn noted, and new market data that supports rebranding.

"Retailers, every eight to 10 years, need to refresh their image," Flinn said. "Through the normal retail divestment portfolio maximization, and through the decapitalization of older sites in the integration areas, we can basically soft-fund the overall rebranding and reimaging program. That's a win for us in terms of our financial framework. It's also a win for our partners because we are really significantly funding a new image, a refreshment that should drive some of their traffic as well, which is obviously beneficial."

Sign of E-Times

The changes at BP are hardly limited to retailing. The company is also focused on the burgeoning opportunities e-commerce presents to retailers, both internally and externally. In fact, the company has tracked and tested the maturation of e-commerce for more than a decade.

BP took its first major step onto the Internet with a Web site (www.bp.com) in 1995, said David Boulter, the oil company's director of e-business development.

Having invested billions of dollars to adapt its technology to an Internet-driven world and having completed a yearlong process emphasizing experiments with e-commerce potential, BP has progressed to what it calls "living on the Web."

"In the early days, our decision to move out on to this frontier was in part an act of faith," said John Legatte, BP's group vice president for digital business. "Today it's an act of business as we dig in and stake out new territories for profitable growth."

These days, BP says it has a relatively clear picture of how e-business will transform the company and the entire oil industry over time. The industry, with its global reach, heavy reliance on data and experience with supercomputing, has been among the most aggressive adopters of the computing and communications innovations associated with e-commerce. BP has become a pacesetter within the oil industry.

Though its evolution is far from complete, an examination of BP's efforts sheds light on how some companies are trying to apply Internet successes, and lessons from setbacks, to their business.

"We're through the discovery phase," Boulter continued, referring to the period of mid-1999 to the middle of last year, when BP pushed its units to think about the difference the Internet had made. "They generated thousand of ideas and started and killed things on a fairly frequent basis. We helped them weed things out."

The discovery phase came years after BP groups had dabbled in early forms of Web-based e-business and was complicated by the company's wave of acquisitions, including Amoco, Arco and Burmah Castrol.

The technology groundwork for moving forward on a corporate basis had been laid by such moves as paying MCI WorldCom $650 million over five years to create a global communications network.

Most of what BP learned has been funneled into internal projects, like equipping 70 percent of its nearly 100,000 employees with laptop computers and other mobile equipment that allows them to plug into the company's intranet and the Web.

The company is also loading its intranet with the data, teleconferencing packages and other services that help employees do their jobs. It's also encouraging employees to visit its Virtual Village site, where a screen depicting a downtown shopping district connects employees to Web sites that can help them with personal tasks like shopping or banking. "We're recognizing that the barrier between work and life does not exist," Boulter said.

On the business-to-consumer front, BP Connect's Web-linked gasoline pumps allows consumers to use the time spent filling their tanks to view news headlines, check weather and traffic reports or order fresh food at one of the company's foodservice partners. Inside the stores are Internet kiosks where drivers can send and receive e-mail and shop on the Web. Down the road, Flinn said, Connect stores could even include self-checkout counters and become pickup points for merchandise ordered over the Internet.

Hanging Tough

This technology commitment is one reason why BP is not afraid to compete with hypermarketers, such as the Wal-Marts and Kmarts of the world. Nor is it willing to yield any part of its market share to these big-box retailers. "All consumers are looking for a way to get an extra 15 minutes out of the day," Flinn said. "Our goal was to figure out a retailing concept that takes the customers' time-pressed needs that is quick and easy to get to, but also delivers the goods and services they need most. A lot of companies promise that, but fall short executing their strategy."

Connect's design, product mix and commitment to technology is more than most consumers expect from their local convenience store, Flinn believes. "Customers are looking for a distinctive, personalized service. We designed Connect to incorporate those elements," she said. "While the hypermarkets can offer lower fuel costs, at the end of the day our experience and advanced retailing concept is what the consumer is looking for."

BP has also accelerated its move onto the Internet through outsourcing. BP outsourced its human resources operation in 1999 to Exult, a start-up company in Irvine, Calif., that is setting up a Web system dubbed myHR for BP's employees. MyHR will allow BP employees worldwide to track their benefits, follow company job listings and update their records.

The company owns a 10-percent stake in Exult. Last year, BP also set aside $20 million for venture investments that give senior executives exposure to e-businesses and other new technology.

"Clearly one of the benefits of bringing together all these companies is that you really take stock of what works and what doesn't work," Flinn said. "The entire BP organization is well positioned to do great things for our employees and consumers. Combined with our commitment to technology and willingness to take risks, we are convinced that we have put together a strategy that will continue to make us a force in the U.S. retail market."
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