The future of fuels was the main topic discussed during the 2015 SIGMA Annual Meeting, the largest gathering of SIGMA members throughout the year. The trade association’s roughly 260 corporate members command nearly 50 percent of the petroleum retail market, selling approximately 80 billion gallons of motor fuel in the United States and Canada each year.
When it comes to fuel trends, petroleum and convenience store retailers are always looking for bright spots. There has been much talk that the millennial generation is not keen on driving or buying new cars, which would affect fuel sales. But SIGMA attendees got some good news in that U.S. consumers are buying new cars again — and bigger cars at that.
Presenter Jessica Caldwell, senior analyst and director of pricing and analysis for automotive industry website Edmunds.com, reported that new car sales are expected to reach a record 17.4 million vehicles in the United States this year. And the prognosis is even better for 2016, when Edmunds.com projects 18 million new car sales. Of course, these vehicles will need to fuel up somewhere.
“Things look pretty good. It’s the best news I’ve delivered,” Caldwell said.
More positive news for petroleum and c-store retailers is that consumers are buying larger vehicles again, with small SUVs especially attractive to women and baby boomers.
There are a few items on the negative side, though. One is sales of electrified vehicles, Caldwell said, defining this segment as hybrid, plug-in and electric vehicles. These vehicles still only have a 2.8-percent share of the market. “Consumer interest is low. Some go to a showroom with the intention of buying an electrified vehicle, but they don’t often leave with one,” she said.
Regarding U.S. fuel consumption, the SIGMA Annual Meeting also provided an outlook on energy, all the way to the year 2040. Paul Tanaka, energy and technology advisor, corporate strategic planning for Exxon Mobil Corp., revealed diesel fuel will show the most growth. Consumption of higher ethanol blends is also expected to increase.
Conversely, electric vehicles will have growth on a percentage basis, but Tanaka stressed the increase is coming from a very small base and electric charging will still only be a small part of the U.S. fuels landscape in 2040.
THOUGHTS ON INDUSTRY CONSOLIDATION
This year’s SIGMA Annual Meeting, which took place at Boston’s Westin Copley Place, kicked off with a “Thought Leaders Forum.” Considering who the panelists were, it was no surprise merger and acquisition activity was a hot topic.
The panel included: Jack Pester, chairman of Pester Marketing Co., who sold his company to World Fuel Services Inc. on Oct. 30; Eric Slifka, president and CEO of Global Partners LP, which has acquired several c-store assets over the past couple of years; and Bob Espey, president and CEO of prominent Canadian retailer Parkland Fuel.
All three executives agreed c-store industry consolidation will continue for the foreseeable future. “There is a mature product with potential declining demand,” noted Espey.
Slifka pointed out, though, there is value in oil companies holding onto retail assets. “Big Oil companies used to be integrated. That has been blown up. [But] I believe there is value in integrating. Value can be driven through the chain, but you have to make sure not to be too disparate,” he remarked.
Pester spoke about how there is always some regret when selling your business. However, he said he’s glad he made the decision he did. “I’m very happy with the sale. I’m a happy boy.”
CYBERSECURITY: A SCARY TOPIC
Shifting from talk of fuels to talk of technology, the SIGMA event delved into cybersecurity, “one of the scarier topics for people doing business today,” according to speaker Bethany Coleman-Fire, associate with law firm Davis Wright Tremaine LLP in Portland, Ore.
Cybersecurity is so scary because it is constantly changing, making it difficult for companies to figure out how to thwart attacks. Only one thing is for certain: Nobody is immune from cyberattacks. In fact, 71 percent of attacks are waged against smaller businesses.
While skimming incidents are most common at convenience store locations, Coleman-Fire cautioned that new types of hack attacks keep coming down the pike.
For instance, ransomware is an occurrence where hackers breach a computer system, with the attacker demanding money in order to regain control of the operating system. Many retailers have decided to pay off the criminals because it is so difficult for law enforcement officials to bring the offending party to justice, Coleman-Fire acknowledged.
She presented an approach to fight back against cyberattacks. Included in the plan:
- Create an effective internal response team with clear responsibilities;
- Select outside counsel;
- Implement fast, low-cost changes;
- Select an incident response team;
- Consider cyber insurance;
- Review hiring and termination practices, such as pre-employment background checks;
- Update/implement written information security policies and procedure;
- Develop a response plan;
- Implement security awareness training;
- Establish technical controls; and
- Test and maintain the system.