Despite Spinoff Plans, Valero Retail Continues to Expand

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Despite Spinoff Plans, Valero Retail Continues to Expand

By Tammy Mastroberte, Convenience Store News - 08/31/2012

SAN ANTONIO -- During its recent second-quarter earnings call, Valero Energy Corp. announced plans to separate its retail business from the remainder of the company, which could be done via a tax-efficient distribution of the retail business to its shareholders. However, the brand continues to expand, both on the retail and fuel sides, through new store builds, acquisitions and new supply contracts.

This June, the company acquired 29 stores from The Crackerbox Stores in Arkansas, and it is in the process of converting those locations to the Valero Corner Store brand. This should be done within four to six months.

"We were in Arkansas 20 years ago, but exited the market because the sites were older and required investment. We were not investing in retail then like we are today," Gary Arthur, president of retail at Valero, told CSNews Online. "[Arkansas] is right next to Texas and adjacent to where we are today, and we had access to our own fuel supply. These are the type of acquisitions we want to look at in the future."

The San Antonio-based company is focused on markets it's already operating in, but Arthur said the chain will expand its footprint if the right opportunity presents itself. In the meantime, future growth will be through building new stores, with plans to construct 11 new locations by the end of 2012 and purchase approximately 20 pieces of land.

"Next year, we will build another 15 new stores and buy another 20 pieces of property. In the long term, we will buy and build more than 25 stores each year," Arthur said.

Additionally, at its existing stores, Valero's programs and promotions are leading to increased profits from within the store, according to Arthur. This summer, the chain expanded its fountain drink promotion, which offers free music downloads from Billboard, to also include movies via Redbox. Every customer that purchased a 44-ounce fountain drink received a free download.

"We have done this for a couple of years, but now we added movies for the first time," Arthur relayed, explaining that the chain also launched a new retail-centric website at where customers entered one of the three million available codes in order to access the downloads. This not only drove traffic to the new site, but also allowed the chain to capture e-mails for future marketing.

"We are getting over 10,000 hits to the website each week specific to this promotion, and half of them are new customers," Arthur said. "Redemptions are up this year over last year as well."

Another main focus at Valero is private label brands, including Fresh Choices and Uforce. Last year, the chain announced it would add 50 new SKUs to the line and it's halfway to reaching that goal. New private label products include energy shots, sports drinks, sodas (both 24-ounce single serve and 2-liters) and salty snacks.

"We continue to hammer away at private label," Arthur said. "We think it's a point of differentiation in the marketplace and it offers consumers significant value, especially today when they are watching their dollars."

This year, the chain added to its salty snacks line of kettle chips to now include four new products -- cheese puffs, onion rings, cheddar fries and corn chips -- in six different flavors. It also launched two new energy shot flavors, and is looking into extending its private label jerky line, introducing more in sports drinks and energy shots, and branching out into nuts and seeds, Arthur revealed.

"Private label is making a significant contribution in [terms of] gross profit dollars, and we have seen double-digit increases in our sales so far this year," he said.

For more on Valero, look for the October issue of Convenience Store News.